Trusts are an important form of estate planning and asset protection. Through the use of various types of trusts including living trusts, irrevocable trusts, family trusts and spendthrift trusts, it is possible to transfer ownership of property and assets to a separate legal entity. By placing assets into a trust, a person can protect those assets from creditors, avoid inheritance taxes when leaving money to children or other heirs, and otherwise safeguard the money and possessions they have worked hard to acquire. There are, however, rules associated with how different types of trusts are created and managed. In this section you will find information on how the process works, the different types of asset protection available, how to establish a trust, and how an estate planning attorney can help in the process.
Just as there is not one correct type of will, there is also not one correct form of trust. In fact, that is the beauty of trusts. A knowledgeable estate planning attorney can create and customize the trust and estate plan that meets the exact needs of a client. Decisions such as whether to use a revocable or irrevocable trust can be made to determine the amount of estate tax savings. While traditional trusts are geared toward leaving wealth to family, for those giving large amounts to a charity or other non-profit organization, charitable trusts can ensure a creator's wishes are properly carried out. Additionally, married couples concerned about the care of a surviving spouse can form either inter vivos or testamentary trusts that will handle most financial affairs once one spouse passes away. A special needs trust is a trust designated for a special needs child who will require considerable care for the rest of their life. Additionally, trusts can be set up for the education or healthcare of a grandchild as a means of helping out family while still alive.
While the process for probating a will is considered public record, a trust can be a better alternative for people who do not want strangers learning about their wealth. Trusts established during the life of a donor can be used as a protective trust that not only keeps affairs private, but also prevents funds from being taken for taxation, bankruptcy, and even lawsuits. For those who want wealth to last and provide for the next generation consistently, spendthrift trusts prevent a beneficiary’s creditors and others from removing funds. Finally, in the event of leaving behind a spouse in a nursing home or other assisted living environment, a discretionary trust will care for the spouse’s needs without allowing creditors to empty the account.
Setting up your own trust is generally not feasible for the layperson. You can do it, but the result will not be ideal. Creditors and the IRS have many ways of penetrating and finding invalidity in poorly drafted trust documents. Creating a trust is an estate planning technique that is best left to a specialized and experienced attorneys.
This being said, trusts have two specific requirements in order to be valid. First, there must be a valid trust document detailing information such as who is establishing the trust, for what purpose, who the beneficiaries are, and who will be acting as the trustee. Once this document is drafted and signed, property must be placed into the trust. This practice is known as funding the trust and can include the transfer of real estate, businesses, and even money management portfolios. Depending on the type of trust created, some trusts can be changed, property increased, or even revoked should something be found invalid in the trust. Upon death of the donor or the finality of the trust documents, the trust becomes an independent entity.
Trusts are useful estate planning tools with many benefits. Among the greatest benefits of a living trust are the efficient flow of wealth upon a donor’s death, avoidance of probate, and possible savings on estate taxes. There are even trusts that can prevent a beneficiary’s creditors and the courts from seizing inheritances. Additionally, trusts established while the donor is alive will avoid costly challenges in probate.
For those who have been diagnosed with debilitating conditions, disabilities, or those taking care of someone with such conditions, trusts can be established for the care of the disabled person. In fact, trusts are often superior to simply utilizing standard accounts as a trust can require that insurance and Medicaid pay the proper percentage of cost before the trust pays the rest.
If you're considering establishing a trust of any kind, you will need the help of an estate planning attorney. To get started, fill out a free evaluation form below and get connected with a qualified attorney who can help with your unique estate.