The desire to protect wealth and pass it on to one’s heirs has been around since ancient times. Though they may have differed with respect to their ambitions, kings, nobles, and commoners all shared a common desire to secure some type of legacy for their children and other heirs. That desire remains a motivating force for many millions of people in modern times. The difference is that we no longer squirrel away our legacy treasures in royal vaults or hidden corners of our cottages. Instead, we have more modern systems in place that allow us to use sophisticated tools like estate planning trusts to achieve our broader end-of-life and legacy goals.
Of course, most Americans still don’t use trusts to protect or pass on their wealth. The reality is that most adults have no estate plan in place, with fewer than half of all individuals and families even using the simplest of estate planning techniques: The Last Will and Testament. The problem is that the failure to plan can leave your estate subject to forces outside your control. Rather than you determining where your wealth goes when you die, those decisions will be made in accordance with State law. That means that your assets could go to people other than those you might choose, while your chosen heirs receive only a minor inheritance or nothing at all.
Finally, a lack of estate preparation can result in your assets receiving no protection from tax obligations, including the estate tax. You’ll have no way of properly preparing for things like nursing home benefit eligibility, or other important concerns. In short, your estate and its assets have no guiding strategy to ensure that all your hard work has meaning beyond this life. The fate of your entire legacy will be left to chance.
The Benefits of the Trust
While there is much to be said in favor of the Last Will and Testament, there are times when even its provisions are insufficient for your specialized needs. To better understand why trusts can be such an important tool for your estate planning, you need only consider the many benefits that you can realize from their use:
- Like a will, your trust can be used to dictate how you want your assets distributed when you die. You can place conditions upon those distributions, schedule them to be made over a set period, or even arrange your trust so that some portion of your assets skips a generation to ensure that your grandchildren are cared for as well.
- With a trust, you can gain specific tax advantages that you cannot enjoy with just a Last Will and Testament. When your trust is irrevocable, you can remove assets from your estate, avoid capital gains taxes in some instances, and mitigate any impact that the estate tax might have on your wealth when you die.
- Your trust enables assets to avoid the time and costs associated with probate. And since probate can cost 5% or more of your estate’s total value, you can help to ensure that your heirs receive the maximum benefit from your wealth instead of allowing a substantial portion of it to be consumed by court costs and attorneys’ fees.
- Trusts offer a variety of flexible options that can help you accomplish many different goals that are not always achievable through the Last Will and Testament alone. For example:
- Pet Trusts. If you have a beloved bet that needs care when you die, a pet trust can provide you a way to name a guardian for the animal and fund its care.
- Special Needs Trusts. For people with heirs who have special needs, this type of trust can enable those needs to be cared for without disrupting critical government benefits like Medicaid and SSI.
- Spendthrift Trusts. If you have an heir with a money management problem or other issues with creditors, the spendthrift trust can ensure that trust assets remain beyond those creditors’ reach.
- Medicaid trust. More than half of us can expect to need long-term care at some point in our later years. That care will need to be paid for, and few people will have the retirement savings necessary to fund the costs on their own. A Medicaid trust can help you to shield some assets so that you can qualify for the program’s nursing home benefits.
- Credit-Shelter trusts. The so-called family trust can help your estate avoid estate taxes when you die by passing any wealth above the estate tax exemption to your spouse. This trust can be used to increase the amount of wealth that you can eventually pass on to your children.
- Your trust can allow you to maintain control over your assets while you’re alive. With a revocable trust, you can name yourself as trustee, appointing a successor trustee to take control of the assets when you pass away. This allows you to continue to wield effective power over the assets in the trust, while still providing a structured way for them to be distributed after your death.
Some of those benefits – like the avoidance of probate and the ability to distribute assets – are provided by all living trusts. Others are dependent upon the type of trust that you select, and your goals. That’s why it’s important to work with an experienced estate planning attorney who can help you to choose the right trust or trusts for your unique needs.
At Frank & Kraft, Attorneys at Law, our team can help you to select the estate planning trusts you need to meet all your planning objectives. Our experience and expertise ensures that you receive the guidance and assistance needed to review your current circumstances, evaluate your long-term goals, and determine which strategies will help you to achieve them. We work with you every step of the way so that you have the comprehensive plan your family deserves. If you’d like to learn more about how our trusts team can serve you, call today at (317) 684-1100 or contact us at our website.