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Benefits of Using Trusts to Protect Assets
Trusts are an exceptional estate planning tool because they provide numerous benefits. One of the top perks is property is exempt from probate and can be distributed to heirs more quickly. Another is estate settlement proceedings are less tedious and don't involve as much work as probated estates.
One drawback of trusts is most people are intimidated by the process. Rather than taking time to understand what's involved they forego the idea and use easier methods such as writing a will and testament.
While Wills are a valuable estate planning method they don't offer as much protection as trusts. For instance, Wills help to lessen the time required to settle probated estates, but do not prevent probate from occurring. On the other hand, trust property is exempt from probate.
People who fail to plan ahead give up their opportunity to have a say in who receives their belongings. They also create additional stress for loved ones. Certainly, they won't be around to witness the consequences of inaction, but their family has to pick up the pieces in the midst of grief.
For just a few hours of time, every adult can create an estate plan that protects their belongings and makes things easier on relatives. The simplest and most effective way to get started is to talk with an estate lawyer. However, it's helpful to learn about the different options and the benefits and drawbacks of each.
Top 5 Reasons to Establish Trusts
1. Bypass Probate: In the U.S., all estates are settled via probate unless other certain strategies are in place. For instance, trust property is exempt from probate, as is financial accounts with assigned beneficiaries.
Besides being a slow process, probate can be quite costly. There can be several costs associated with it including court filing, administration, and legal fees. Overall, it can take up to a year before heirs receive inheritance gifts.
2. Lessen Risks of Family Disputes: People contest Wills when they feel slighted or were entitled to money or property they didn't receive. Contested Wills create a lot of fallout that can take years to resolve.
With that said, trust Wills can be contested, but the process is more involved. Plaintiffs will have to prove either undue influence or fraud was committed at the time the trust was established.
3. Keep Private Matters Private: Wills that pass through probate are filed with the court and become public documents; allowing it to be read by anyone. Furthermore, notices have to be published in newspapers to inform the public that probate is underway.
Since trusts do not endure probate, all records are private and public notices are not required. Only people who are directly associated with the trust are provided with a Will and informed of settlement proceedings.
4. Simplify Estate Settlement: At minimum, probate lasts 4 to 6 months. The exception to the rule is if it qualifies for small estate exemption. Trusts generally settle in 90 days or less.
5. Pass along Assets to Future Generations: Trusts are an ideal way to provide money and property to minor children. They can be established to provide educational funds, investments, or real property to children, grandchildren, and even great-grandchildren.
Who is Involved with Trusts?
Trusts include a Trustor, Trustee, and Beneficiaries.
- Trustor is the person who establishes the trust.
- Trustee is the person who maintains the trust and settles the Trustor's estate. Most often, the Trustor acts as the Trustee until death. Afterward, a successor Trustee takes over.
- Beneficiaries are the people who receive estate assets.
Types of Trusts
There are many types of trusts offering different levels of protection. Each can be customized to suit the needs of Trustors. The overall goals determine which kind is needed.
Trusts can be arranged to protect assets gifted to minor children; safeguard business interests or investment properties; reduce estate and inheritance tax liabilities; or provide financial gifts to charity, research, or education.
Trusts fall into the category of either living or testamentary. Living trusts are arranged while the Trustor is alive. Testamentary trusts are established after death.
Living trusts are either revocable or irrevocable. Revocable trusts can be changed when needed. Irrevocable trusts cannot be changed without permission from the court.
Other Estate Planning Strategies
Even though trusts are a great estate planning method, they aren't necessarily for everybody. Some people can get by with a basic Will or assigning beneficiaries to receive cash and property. Preparing a Will is important for every adult. Small estates will be able to bypass a portion of probate as long as a will and testament is provided to the court.
People can designate beneficiaries to receive funds held in bank, investment, and retirement accounts, as well as titled property.
A few other important documents are power of attorney (POA) and healthcare proxies. POA gives permission to others to carryout certain duties on behalf of another person. Medical POA lets a personal agent act as a representative and make decisions about medical care in the event of emergency.
Getting help from an estate attorney, such as Shannon C Switzer, helps make certain all your worldly possessions are adequately protected. Putting together a life plan lets people rest easier knowing loved ones are taken care of in the event of tragedy or loss of life.