Estate plans are essential to ensure that your assets are preserved for your beneficiaries. Would you like to avoid conflict in your family, increased probate costs, or unanticipated taxes? You can be proactive when you plan in advance for your estate and beneficiaries. Even though wills are an important part of an estate plan, they are not the ultimate answer when estate planning. On occasion, estate plans require more detail and instruction. A properly established trust can accommodate the needs of even the most ubiquitous estate planning requirements.
When using a trust in an estate plan, you must decide what kind to utilize. Let’s explore the most typical types of trusts:
- Revocable Trusts – This kind of trust is crafted by the grantor while still living to transfer property to a trustee. The power to remove or modify the trust continues to remain with the grantor. The trust is irrevocable upon the grantor’s death. At this point, the trust cannot be changed or modified. The trustees are bound by the requirements established in the trust regarding the distribution of assets and property. The trustees also have tax responsibilities for the disbursements. A living trust can also offer multiple advantages:
- Circumvent probate delays
- Guard against incapacitation of the grantor and beneficiary
- Ensure progression of trustees
- Ease of access to funds by beneficiaries
- Privacy
- Testamentary Trusts – When a trust is created through a Will, after a grantor is deceased, it is a testamentary trust. When specific planning goals are desired with the estate, this type of trust is used. A testamentary trust can also provide some tax shelter benefits. Here are some examples of some planning goals:
- Protecting assets for children from a former marriage or union.
- Offering security for your spouse’s financial future.
- Providing care for special needs beneficiaries.
- Ensuring that minors inherited assets are protected
- Gifting to charities.
- Irrevocable Life Insurance Trust – In the fortunate event of the grantor begetting a substantial amount of wealth, an Irrevocable Life Insurance Trust should be part of the estate plan. The ILIT is funded by a life insurance policy with the trust serving as the owner and beneficiary of the policy. This type of trust has some protection benefits from federal taxes, but amounts over pre-set limits may be subject to very high taxation.
Estate planning can be a very tedious process, regardless of your personal situation. This process is essential to ensure that your family or spouse is provided for as you intend. Always consult with an estate planning professional to be assured that the financial future of your family is preserved.
