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Home » What are The Top Living Trust Benefits?

What are The Top Living Trust Benefits?

October 11, 2018Trust in Indianapolis

living trust benefits

It is important to understand all of the potential living trust benefits when you decide if you want to make a living trust. The specific benefits can vary depending upon your personal situation, so it is a good idea to talk with an experienced attorney who can provide you with personalized advice on whether a living trust is the right tool for you to use. 

Frank & Kraft can help. A compassionate and knowledgeable member of our legal team can work with you to understand your goals for the future and to make a comprehensive plan to provide for your loved ones and protect your assets. Often, this plan will involve the creation of a living trust. When it does, we’ll help you to make a legally valid trust document to ensure that you are able to get the benefits that a living trust will provide. To find out more about the help we can offer, give us a call today.

Top Living Trust Benefits

There are many advantages to the creation of a living trust. Some of the top living trust benefits include:

  • Protection for assets in case of incapacity: When you make a living trust, you can name someone who will be the backup trustee once you become unable to manage the money and property that you have put into the trust. In the event that you become incapacitated, your backup trustee will have authority to begin managing your wealth. Your assets won’t be at risk of loss during an interim period while your family goes to court to get a guardian or conservator named and you won’t have to count on the court naming the right guardian or conservator to manage your wealth.
  • Passing assets outside of the probate process: One of the best benefits of a living trust is that assets which are held within the trust are able to be passed to heirs or beneficiaries through the trust administration process instead of through the probate process. This means that the wealth you hope to pass on can move to heirs or beneficiaries much more quickly and much more cost effectively than it would have passed through the probate process. It is also a more private process to pass assets through trust administration since court hearings aren’t required as part of trust administration. In fact, there’s no need to go to court at all unless there are problems, so there’s no court record when money and property pass through trust administration.
  • Maintaining flexibility: With a living trust you get to be in control over your money and property as the primary trustee unless or until something happens to you. You can also end the trust or change it at any time, unlike with an irrevocable trust. This flexibility is often seen as a major advantage to people who don’t want to give up control over their wealth.

There may also be other benefits that are based on your specific situation. Frank & Kraft will help you to determine if you should create a legal team and will help you to compare living trusts to other trust types including irrevocable trusts.

Getting Help from a Living Trust Attorney

If you want to take advantage of the benefits associated with creating a living trust, contact Frank & Kraft today to find out what options you have available to you and how you can go through the trust creation process. We’ll assist you with all aspects of creating an enforceable trust document, including selecting the right type of trust, naming your trustees and beneficiaries, and funding your trust.

To learn more about the ways our legal team can help you with trust issues, join us for a free seminar. You can also give us a call at 317-684-1100 or contact us online to get personalized one-on-one advice about whether a trust is the best tool for your specific situation. Reach out today to get your trust creation plans underway.

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Paul A. Kraft, Estate Planning Attorney
Paul A. Kraft, Estate Planning Attorney
Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms in Indiana in the area of estate planning as well as business and tax planning.

Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
Paul A. Kraft, Estate Planning Attorney
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Trust Administration Steps
To ensure that your estate doesn’t lose assets to federal gift and estate taxes you may need to include tax avoidance strategies in your estate plan. One estate planning tool that can provide tax avoidance benefits is a Grantor Retained Income Trust, or GRIT. Always consult with your estate planning attorney before deciding what tools to incorporate into your estate plan. In the meantime, however, the Indianapolis trust attorneys at Frank & Kraft explain how a Grantor Retained Income Trust works and why you might want to include one in your estate plan. What Is a GRIT? A GRIT is a specialized type of irrevocable trust that allows the Grantor (creator of the trust, also referred to as the “Settlor”) to transfer assets into the trust while retaining the right to receive all of the net income from the trust assets for a fixed term of years, referred to as the “initial term.” Income from the trust is distributed to the Grantor at least annually during the initial term. At the end of the initial term, the remaining principal is either distributed to the trust beneficiaries or remains in the trust for the benefit of those beneficiaries. The primary benefit of a GRIT is that if (this condition is important) the Grantor survives the initial term, the value of the principal held in the GRIT is excluded from the Grantor’s estate for federal gift and estate tax purposes. How Does a GRIT Help with Tax Avoidance? The tax avoidance benefit of a GRIT is found in how the value of the trust principal is determined because those assets are valued at a discount. The value of the discount depends on the length of the initial term of the GRIT, and the applicable federal rate in effect at the time the GRIT is established. The transfer of assets to a GRIT constitutes a gift equal to the total value of the assets transferred to the GRIT, less the present value of the retained income interest held by the Grantor for the initial term. If the Grantor survives the initial term, the assets comprising the GRIT will pass to the designated remainder beneficiaries at a reduced gift tax value. GRIT Beneficiaries Section 2702 of the Internal Revenue Code determines who you cannot name as a beneficiary in a GRIT. Excluded beneficiaries include your spouse, your ancestors or the ancestors of your spouse, any lineal descendant of yours or your spouse, any sibling of yours or your spouse, or the spouses of any of the foregoing persons. You can name lineal descendants of siblings, (nieces and nephews) relatives even more distant than nieces and nephews, or friends of yours or your spouse as beneficiaries of a GRIT. How a GRIT Works in Practice Imagine that you establish a 15-year GRIT and transfer $100,000 of assets into the trust and that the applicable federal rate is five percent. As the Grantor, you will receive the income from the GRIT during the initial term. The present value of the retained income interest is $66,007, making the value of the gift $33,993. If you survive until the end of the initial term, however, the remainder beneficiaries will receive $100,0000 plus all capital growth. Your estate, however, will only need to acknowledge a lifetime gift in the amount of $33,993 (the applicable value of the gift at the time it was made). Disadvantages of Using a GRIT Just like most tax savings tools and strategies, there are some disadvantages to relying on a GRIT. First, it is an irrevocable trust, meaning if your personal circumstances change, you cannot make corresponding changes to the trust. Second, if you do not survive the initial term the advantages gained by creating a GRIT do not apply. Contact the Indianapolis Trust Attorneys For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about establishing a Grantor Retained Income Trust, contact the experienced Indianapolis trust attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
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