A properly constructed trust in your estate plan can help protect your assets and your family should something happen to you. But the language surrounding trusts can often be confusing to someone who doesn’t “speak lawyer.” That’s why we’re here. The qualified trusts lawyers at Johnson Legal are here to help you choose the best options for securing your assets using trusts in your estate plan.
A trust is an agreement (contract) with yourself or with your spouse to own property, so it is not in your name. It is a legal maneuver to avoid probate, which is triggered when you die with property in your name. In estate planning, trusts are generally used to protect assets and transfer them to beneficiaries after death. They can also be used to help avoid taxes on certain aspects of your estate. In the past, trusts were primarily used by the ultra wealthy. Today, they have been simplified, so they are useful to everyday people.
While figuring out what type and configuration of trust(s) is/are right for you and your beneficiaries can be a difficult and time-consuming part of the estate planning process, the extra time spent planning now could mean time and money saved for your family members later. Setting up a trust is just one of many estate planning tools you can use.
Perhaps the most significant benefit of using trusts is the minimization or avoidance of probate court. Assets passed to the surviving spouse or beneficiary directly through trusts can avoid probate, thus saving beneficiaries both time and money on what could otherwise be a lengthy legal probate process.
Trusts can also be used to receive life insurance proceeds for minor children.
Another benefit of using trusts is avoiding taxes. Trusts are flexible tools that can shelter, protect, or segregate assets to reduce or avoid taxes. Privacy Since trusts are not publicly filed, they remain private and help keep you and your family’s financial assets out of the public eye.
Trusts allow you to control your remaining assets by deciding who gets what after your death and when they will receive it. Trusts also give protection against creditors since transferring assets out of the estate can limit a creditor’s access to them.
Experienced trusts lawyers at Johnson Legal will help you consider three types of trusts when planning your estate: testamentary, revocable, and irrevocable. The type of trust used in planning your estate depends on your goals as a grantor. To ensure you’re using the correct kind of trust in planning your estate, be sure to seek out the help of a qualified legal professional at Johnson Legal. A revocable or living trust is created while the grantor is still living. A revocable living trust allows the transfer of assets to bypass probate after death. “Revocable” means the terms of the trust can be changed or altered while the grantor is still living. Most trusts are created as “revocable trusts.”
An irrevocable trust is one in which the terms cannot be changed or terminated after the trust is created. The main reason you would want to build an irrevocable trust is to transfer assets out of the estate entirely. This would allow you to protect your assets from creditors and lawsuits and could also allow for a reduction in estate taxes. While an irrevocable trust can become active during a grantor’s lifetime, a testamentary trust becomes active after the grantor’s death. This type of trust is named and contained in the Will of the deceased and is revealed through the probate process.
There are many questions surrounding the use of trusts in planning your estate. To help you plan your estate and answer any remaining questions about trusts, be sure to reach out to a qualified estate planning attorney at Johnson Legal.
What types of trusts are best for real estate?
Revocable trusts, or living trusts, are the most commonly used types of trusts for estate planning. These types of trusts help lower the costs associated with probate and help preserve privacy after your death.
How are trusts used to avoid taxes?
Only irrevocable trusts can be used to avoid taxes. In estate planning, irrevocable trusts are usually not part of the grantor’s taxable estate. So by using an irrevocable trust, assets will pass to the beneficiaries after your death without being subject to estate tax.
What are the disadvantages of trusts?
The main disadvantage of trusts is that they can be more difficult to understand the language surrounding the distinction of trusts can be confusing to someone who isn’t in the legal field or in estate planning. Luckily, qualified estate planning attorneys at Johnson Legal can help you sort out the “legalize” and help you make the best decision regarding trusts for your estate.