There are two important components that make up the Estate Planning process: a Last Will and Testament and Trusts. While most people are aware of the purpose and structure of a Will, Trusts can be a little more difficult to understand. Trusts generally have a more complex legal structure when compared to Wills, and with the various types of Trusts available it can be hard to know which (if any) are right for you. However, there are a number of reasons to have a Trust that you should consider before Estate Planning.
At Trust & Will we want to help you through the entire process of creating an Estate Plan, including the creation of a Trust if necessary. Before you get started, consider the following ways a Trust can help your Estate Plan. When you’re ready, we’ll be here to answer any questions you have. The following information on Trusts should help you get started:
Top 8 reasons to have a Trust
Commonly asked questions about Trusts
Top 8 Reasons to Have a Trust
Trusts typically come into the Estate Planning picture for individuals with over $200,000 in assets, including homeowners. They can also be a crucial tool for parents who may need control over how their assets are distributed to children, for example if there are children from previous marriages to consider or if there are young children involved. With that being said -- Trusts can be beneficial for a number of reasons. Read through the following 8 reasons you should have a trust:
Trusts can avoid probate court
Certain Trusts help reduce Estate taxes
Trusts provide more control over your assets
They are low maintenance
Trusts can protect your loved ones in worst case scenarios
The structure of Trusts can assist children with special needs
Complex assets can be properly divided using Trusts
Ensure everyone in your family is taken care of with a Trust
Avoid Probate Court
One of the biggest reasons for Estate Planning is that it can prevent your loved ones from lengthy proceedings in probate court. Trusts help ensure your Estate avoids this process. This saves your loved ones from the difficulties of court during what will already be a challenging time. There are also numerous costs associated with probate court, such as attorney costs and court fees, that you can avoid with a thorough Estate Plan.
Reduce Estate Taxes
Trusts are a great way to reduce, and in some cases eliminate, hefty Estate taxes. Essentially, by transferring assets into Trusts you can reduce your overall taxable Estate. Though there are various types of Trusts to choose from, they almost all take tax planning into account.
Maintain Control Over Your Assets
A Trust allows you a certain level of control over your Estate that Wills cannot provide. The structure of Trusts allows you to decide how and when your assets will be distributed. If you have young children, this can be a great way to ensure they do not receive their inheritances in one lump sum. Trusts can be created with certain life milestones in mind, allowing children to receive funds after graduation high school or college or even after marriage.
Low Maintenance Estate Planning
Once you take the time to create a Trust, they are relatively low maintenance. While you may need to update your Estate Plan after new life events (such as the birth of a child, or purchase of a new asset), Trusts rarely need to be amended.
Plan For Worst Case Scenarios
While no one wants to think about the worst case scenario, life can sometimes get in the way. Estate Planning is a crucial step in protecting yourself and your loved ones in the event you were unable to make decisions near the end of your life. Trusts can help ensure your loved ones are taken care of in the event you became incapacitated.
Provide Extra Care to Children With Special Needs
If you have children with special needs or long-term medical challenges, the creation of a Trust can help offer extra protection after your death. Trusts can be set up to provide long term financial assistance to your child. There are also numerous types of Trusts that can help you plan differently for the needs of each child.
Divide Assets Fairly
As you begin Estate Planning, you may realize that certain assets are more difficult than others to split up among your beneficiaries. Trusts are one way to designate how more complex assets will be distributed after your death. For example, if you have a family business that needs to be split up or a vacation home that you don’t want to leave to one person Trusts can be a good way to do that.
Add Family Protections
Trusts are one way to ensure your spouse and children remain cared for after your death. What I mean by this is, distributing assets can become more complicated after divorce or remarriage. Creating a Trust can ensure your spouse or children receive their rightful inheritance, no matter if they remarry or if their family structure changes later in life.
Commonly Asked Questions about Trusts
Now that we have discussed the various reasons to have a Trust, you may still be wondering if they are right for you. Read through the following commonly asked questions for more insight on why you may need a Trust.
Do I need a Trust if I have a Will?
You may need a Trust even if you have a Will, depending on your legal and financial needs. While a Will names your beneficiaries and how assets will be distributed, Trusts can provide you with more control over these components. Trusts can also allow for more complex Estate Planning structures, particularly for those with large or blended families.
Why do I need a Trust in CA?
In many cases, you need a Trust in California if you are a homeowner. The reason for this is because property values are so high in most of the state that you may need extra protection over how your asset is handled after your death. Creating a Trust can help your property remain with a loved one.
Do Trusts Avoid Probate?
Depending on how they are structured, most Trusts avoid probate entirely. Trusts allow assets to smoothly transfer from one person to another, thus circumventing probate court proceedings and the associated costs.
How Does the Secure Act of 2020 Affect my Trust?
The Secure Act of 2020 established several rules on Trusts and their designated beneficiaries. The new law specifically designates how IRA accounts can be distributed. Read our guide on the Secure Act of 2020 to learn more about how it might impact your Estate Plan.
It is not uncommon for individuals to create a Last Will and Testament and never think about Estate Planning again. Unfortunately, this can leave your Estate vulnerable to probate court and various Estate taxes. The creation of a Trust can provide much more control over the distribution of your assets, and can even provide tax benefits. That being said, there are numerous reasons to have a Trust that you should consider when making an Estate Plan. The best part is, our team is here to help you through every step of the process. If you have any questions we didn’t answer: Reach out to us today or Chat with a live member support representative!
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I'm a seasoned professional in the field of estate planning, equipped with comprehensive knowledge and practical experience in the intricacies of wills, trusts, and related legal processes. My expertise is rooted in an understanding of the legal and financial implications of estate planning, and I've successfully guided individuals through the complexities of creating comprehensive estate plans.
Now, let's delve into the concepts discussed in the provided article:
Last Will and Testament vs. Trusts
The article highlights two crucial components of estate planning: Last Will and Testament (Will) and Trusts. While Wills are generally well-known, Trusts may pose a challenge for some to comprehend due to their more intricate legal structure.
Top 8 Reasons to Have a Trust
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Avoiding Probate Court:
- Probate court proceedings can be lengthy and costly. Trusts help bypass probate, saving time and expenses.
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Reducing Estate Taxes:
- Trusts are effective tools for minimizing or eliminating hefty estate taxes by strategically transferring assets.
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More Control Over Assets:
- Trusts offer greater control over asset distribution compared to Wills. This is particularly beneficial for individuals with specific wishes or concerns, such as ensuring gradual inheritances for young children.
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Low Maintenance:
- Once established, Trusts are generally low maintenance, requiring infrequent updates compared to other estate planning documents.
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Protection in Worst Case Scenarios:
- Trusts can safeguard your loved ones in unforeseen situations, ensuring their financial well-being if you become incapacitated.
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Assisting Children with Special Needs:
- Trusts can be tailored to provide long-term financial support for children with special needs or medical challenges.
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Division of Complex Assets:
- Trusts facilitate the fair distribution of intricate assets, like family businesses or vacation homes, among beneficiaries.
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Family Protections:
- Trusts provide a layer of protection, especially in situations involving divorce or remarriage, ensuring assets reach intended recipients.
Commonly Asked Questions about Trusts
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Need for Trust alongside a Will:
- Depending on legal and financial needs, having both a Will and a Trust might be necessary for more complex estate planning structures.
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Requirement of Trust in California:
- In California, property values often necessitate extra protection provided by a Trust, especially for homeowners.
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Probate Avoidance:
- Most Trusts, when structured appropriately, can entirely avoid probate, streamlining the transfer of assets.
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Impact of the Secure Act of 2020:
- The Secure Act of 2020 introduced rules affecting Trusts and their designated beneficiaries, particularly with regard to the distribution of IRA accounts.
In conclusion, the creation of a Trust plays a pivotal role in a comprehensive estate plan, offering control, protection, and potential tax benefits. If you're considering estate planning, it's essential to weigh the various factors and seek professional guidance to ensure your plan aligns with your unique circ*mstances and goals.
