People come to estate planning with different goals, different estate problems, and different family circumstances. Some people have very simple estates that require very simple estate planning while others need advanced planning. Trusts are a common estate planning tool. If you are unsure how a living trust might help you, read on to learn eight reasons to use a living trust.
A living trust will not protect the grantor’s assets from judgments and creditors. However, your living trust can protect assets for your beneficiaries. For example, you could establish an asset protection trust for your children and name that trust as a beneficiary of your living trust. After your death, the asset protection trust is funded.
The terms of a trust may actually help safeguard trust assets from financially reckless heirs. A spendthrift provision prevents a beneficiary from assigning away their inheritance. A discretionary provision allows the trustee to make distributions at his or her discretion or to pay a beneficiary’s bills instead of making a direct distribution to the beneficiary.
Trusts set up through a Will are called testamentary trusts. Living trusts are established while the grantor is still alive. The grantor of the trust will still be responsible for taxes on the trust. However, beneficiaries of living trusts generally do not pay taxes on their distributions of principal. Also, married couples may be able to reduce potential federal estate taxes using a revocable living trust.
When a grantor establishes and funds a trust, they may serve as the trustee. However, the grantor typically names a successor trustee. If the grantor becomes incapacitated, the successor trustee takes over. Assets within the trust continue to be managed. However, a revocable living trust may not help with qualifying for government programs like Medicaid.
Assets used to fund a trust generally pass to the beneficiaries without going through probate. Living trusts are only one way to avoid probate, however.
Passing assets to your heirs through a living trust instead of a Will can greatly reduce the potential for a Will contest.
During your lifetime, it may be easier to manage your assets if they are trust assets. After your death, the trustee or successor trustee of your living trust will spend less time gathering your assets if they are all part of your trust.
Trust documents generally are not released to the public, unlike a Will. Someone may be able to obtain a copy of your Will from the county clerk after you die. The same cannot be said for your trust.
Located in Palm City, the Law Offices of John Mangan, P.A. also serves clients in Stuart, Hobe Sound, Jupiter, and Port St. Lucie.
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Written by: John Mangan, JD, MBA