If you’ve heard of the living trust, chances are that you think it’s one of those planning tools that complicated your life. In reality, proper use of these trusts can help to simplify your estate planning. Many people think that the will is the simplest type of estate planning available to them, and in many cases they’re right. The Last Will and Testament is the most basic type of estate plan that you can use – though most people, unfortunately, don’t even bother to create that basic document. For many estates, however, the will is not as good an option as a living trust. Here are some of the reasons a Huntersville trust attorney will recommend living trusts.
Living trusts help you avoid probate
First, living trusts can help avoid probate. The probate process can be a necessary part of settling an estate, especially in a nation where fewer than half of adults even bother to create a Last Will. Most people, though, prefer to avoid having their assets tied up in a potentially drawn-out probate after they die. The problem is that there can be limited options to avoid probate – especially if your estate includes real estate or isn’t eligible for any type of shortened probate process.
Probate is necessary for assets that are in your sole name, with no beneficiary designations, or assets owned with someone else but not with a right of survivorship — this is common with inherited real estate. To avoid probate, you need to set up another way to transfer your assets at your death. Sometimes this can be done with joint tenancy and sometimes with beneficiary designations — both have advantages and disadvantages. A living trust provides another option since you transfer ownership of your assets to the trust when you create and fund it.
Trusts can help with complex planning needs
Many of us have planning needs that a standard will can’t adequately address, but a living trust can. Consider the needs of disabled heirs whose government benefits might be disrupted if they receive direct gifts under a will. A special needs trust can ensure that they receive their inheritance in a way that keeps them from losing their eligibility for benefits.
Another concern is heirs who are unwise with money or who have large outstanding debts. A spendthrift trust can prevent those heirs from wasting their inheritance or having it consumed by creditors. A living trust can provide a method of taking care of any pets that you might be leaving behind. A pet trust can be an effective way to make sure pets’ needs are met. They can also be used for providing support for your favorite charities. Charitable trusts can give you certain tax benefits while you’re alive, and ensure that your favorite causes continue to receive support when you’re gone.
Trusts can provide protection for assets
Asset protection is often little more than an afterthought in estate planning, but some trusts can provide important tools to protect assets from nursing home costs, creditors, and potential litigants. It’s important to note that revocable trusts won’t accomplish this goal during your lifetime since you keep control of the assets — you can revoke the trust and reclaim the assets at any time.
An irrevocable trust, on the other hand, can provide asset protection by placing assets giving control to someone you trust while still allowing you to say how the assets will be distributed to your beneficiaries. Because you give up control and you can’t take the assets back, they aren’t considered your assets for creditor purposes and your potential creditors can’t reach the assets. That makes irrevocable trusts an important tool to use in nursing home planning and other asset protection planning.
Trusts can help you avoid estate taxes
Irrevocable trusts can also be an effective way to reduce or even eliminate estate tax liabilities if that is a concern. The estate tax currently applies only to estates of more than $11.2 million (including life insurance, retirement plans, business interests, investments, and other assets). For those with large estates, trust planning can be critical to minimizing taxes. If you have further questions about how this works, ask our Huntersville trust attorney.
Irrevocable living trusts allow you to maintain control
Unlike these irrevocable trusts, a revocable living trust allows you to keep control over your assets while you’re still alive, and pick a successor trustee to take over when you pass away. Until then, you can name yourself as trustee and use the assets however you want.
The bottom line is that trusts are often very useful in your estate planning. If you have questions, reach out to an attorney who is experienced in estate planning and specifically in working with trusts.
If you have questions regarding living trusts or any other estate planning matters, please contact the experienced attorneys at The Potter Law Firm for a consultation. You can contact us either online or by calling us at (704) 944-3245 (Charlotte, NC or Huntersville, NC) or for individuals in Kentucky at (606) 324-5516 (Ashland, KY) or at (859) 372-6655 (Florence, KY).