Estate planning is essential to ensuring your assets make it to the right people, yet many people neglect this important step. In fact, 60% of Americans have not yet completed an estate plan.
It’s understandable that people don’t like discussing this subject. People don’t like thinking about their deaths. If you don’t plan though, you can leave plenty of trouble for your loved ones after you’re gone.
Even people that complete an estate plan make mistakes that can cause trouble. These mistakes are easily avoidable though. There are 10 common mistakes you want to watch out for.
What Is Estate Planning?
Estate planning involves protecting your assets for your loved ones. An estate plan includes legal documentation to ensure that your property will get handled the way you want.
Your estate plan leaves full instructions for how your property and other assets get divided between your beneficiaries. These documents include wills, trusts, and charitable gifts.
Estate Planning Mistakes
Estate and trust planning works for everyone, no matter the value of your assets. While the process doesn’t prove complicated in itself, it’s easy to make mistakes if you’re not careful.
You want to make sure you know what you’re doing before you get started with an estate plan. It’s especially important to avoid the most common mistakes.
1. Not Creating an Estate Plan at All
The biggest mistake you can make involves avoiding the estate plan altogether. This mistake occurs for the majority of Americans.
Even celebrities neglect this important process. Notable celebrities such as Aretha Franklin and Prince are known to have died without any type of will in place.
Without a proper plan in place, you leave confusion and complications for those you leave behind. Without clear instructions, people can bicker and fight, or even sell important family heirlooms. The official plan cuts down on these issues.
2. Not Working with a Professional
To save money, many people attempt to complete their estate planning on their own. They wade through the documentation attempting to make sense of it all on their own.
This leaves the estate plan open to missed or wrong information. A professional, such as an estate or tax attorney, can help you make sense of everything involved. They can help you understand all estate and tax laws to ensure you don’t miss anything.
3. Not Paying Attention to the Details
It’s easy to let an estate planner handle all the documents and just sign on the line. This will prove a mistake. You want to check to make sure you understand everything involved.
You also want to ensure there are no mistakes with the completed plan. You want to understand how it works and how to implement the plan. Make sure you ask questions about anything you don’t understand.
4. Failure to Officially Add Assets
When you set up a trust, many assets, such as personal items, are easy to transfer with simple listing. Other items need more official documentation to add them.
- Financial records
These and other items require you to add the trust as an owner to make it official. This ensures the assets can get transferred without issue.
5. Not Understanding Ownership
Personal items are easy to establish ownership with. Other assets, including assets with dual ownership, become trickier when it comes time to transfer ownership.
It’s important to review the ownership of all assets in your name. Make sure you understand how access to these assets works. Update your estate plan if changes to laws or changes to your situation occur.
6. Failure to Understand Retirement Plans
Tax laws can make retirement plans tricky. Many people don’t understand how these tax laws work and end up leaving loved ones paying hefty fees to access the money.
If you add a retirement plan to a trust, you need to understand the tax laws that affect this. You need to word the plan to ensure excess taxes aren’t taken out. You might even consider naming individuals instead of the trust if necessary.
7. Forgetting Gift-Giving
Wills and trusts still get taxed before everything gets transferred completely. People often look at leaving as much as possible without considering how much money their loved-ones lose due to taxes. Giving gifts through the trust can reduce taxes on the estate though.
You can make gifts to individuals for up to $14,000 per year. You can also make gifts to businesses and charities through the trust. Charitable gifts give you the opportunity to reduce taxes while helping others.
8. Ignoring Power of Attorney
Many people forget to add someone to ensure everything gets completed correctly. Ignoring the power of attorney can lead to more confusion.
You need people to act as power of attorney for your estate plan. These people ensure your financial and medical plans get carried out. You also need to make sure this information stays up-to-date and easy to find.
9. Not Updating Beneficiaries
Things happen, and beneficiaries can change. Births, deaths, divorce, a change of mind, all these situations can lead to changes to the people you want to leave assets to.
It’s important to review your documentation and make sure everything stays up-to-date and any changes get made. Make sure your assets get to the right people.
10. Not Taking New Situations Into Consideration
Every major family and life event needs consideration for an estate plan. You might not think of this right away, but you really need to review the plans to ensure nothing gets missed.
When your situation changes, check your plan and make sure life events don’t require changes to the trust. Changes can include assets, property, or even work status.
Finding Help for Estate Planning
If you understand the common estate planning mistakes, it’s easier to ensure your plans get completed correctly. It’s always best to get help from professionals to ensure your assets get divided correctly.
An estate planning attorney can help you manage everything. For more information, contact us to discuss your needs.
Successful Estate Plan Must-Haves
How would your current estate plan hold up in an unfortunate turn of events? Would your family members have access to your assets? Do you have a designated guardian for your children?
This article highlights several factors that go into creating a successful estate plan that won’t leave things up to chance. Here are some key points:
- A will or trust should be a main component of your estate plan, but isn’t enough on its own.
You will need a will or trust to ensure your property is distributed according to your wishes or to help limit estate taxes. While a will or trust is essential, it is only the beginning. It’s important to take further steps to create a solid estate plan.
- Draft a Durable Power of Attorney.
Without a power of attorney, the fate of your assets could be left up to a court. This document can give your agent the power to make legal and financial decisions on your behalf.
- If you have minor children, designate a guardian and a backup guardian.
If you have children or are considering having children in the future, picking a guardian is a very important piece of your estate plan. Without a chosen designation, your children could end up living with a family you would not have selected, or in an extreme case, become wards of the state.
Selling a small business isn’t like selling lemonade, or even selling a car. It’s a major undertaking with several moving parts, requiring experienced negotiators, capable lawyers, and a successful strategy from day one.
Which means that if you want a sale to succeed, you need to go in with a plan.
If you plan on selling your business, here are seven steps you should take to make the whole process easier.
1. Get Your House in Order
Before you do anything else, you should start by getting your affairs in order.
You might not think that you need to. After all, the business is profitable, and while there are areas where functions could be clearer, everything more or less goes without a hitch.
Keep in mind, though, that you’ve been with your business since the start. Things that make sense to you could easily spook a potential buyer.
When you first consider selling your company, make sure to get these things in order:
- Financial records
- Financial reports
- Employment contracts
- The legal structure of your business
- Any family ownership arrangements
- Intellectual property arrangements
If you’re unclear on any part of the puzzle, your attorney can help you figure out where you should focus and how to protect your assets in preparation for a sale.
2. Prepare the Right Documents
The next thing you can do to smooth out a deal (and help your lawyer’s peace of mind) is making sure that you have the right legal documents prepared.
This includes things like:
- Financial statements (profit and loss, cash flow projections, etc.)
- A complete list of stockholders and shareholders
- A breakdown of the percentage of shares owned and stock issued
- A list of names and titles of everyone authorized to sign papers for your business
- Copies of all employment contracts
- Copies of all your business’s insurance policies
- Copies of your incorporation papers or equivalent paperwork
- Copies of your federal and state tax returns going back three years
- Copies of any pending lawsuits
- A schedule of company assets
- A complete list of your company’s creditors
Keep in mind that this list is by no means exhaustive. If you’re not sure what documents you need, ask your attorney.
3. Separate Lines of Business
Multiple lines of business help your business stay profitable.
Unfortunately, they also make it harder to value, which can drive away potential buyers.
You look at your business and see an integrated whole. A buyer may only understand one aspect of the business, so they see it as fragmented or view certain assets as liabilities.
You can help keep a buyer interested by separating your business assets into clear divisions. This will help buyers get a clearer picture of the benefit of acquiring your business, which may lead them to offer more.
4. Know the Value of Your Business
With that in mind, it’s vital that you know the value of your business before you try to sell it.
Specifically, you should understand the value of your business from a buyer’s perspective.
The best way to do this is through a business valuation. This will keep you from fixating on a specific sale price from start to finish, and thus keep you from leaving buyers’ money on the table.
Get in touch with an appraiser and ask them to draw up a detailed explanation of the business’s worth. This will add credibility to your asking price.
5. Reason for and Timing of the Sale
Buyers will want to know, so you should figure out the reason and timing for the sale of your business before you sit down with a buyer.
Owners sell businesses for any number of reasons, though these are among the most common:
- Becoming overworked
- Partnership disputes
- Illness or death
All of these are reasons that a buyer will generally accept at face value. On the other hand, if you’re trying to sell your business because it’s no longer profitable, you’re going to have a much harder time bringing in buyers.
Part of these considerations is the timing of the sale. Ideally, you should start to prepare for the sale a year or two ahead of time so that you can make your business appear more attractive in the meantime and get everything in order before you initiate a sale.
6. Put Together the Right Team
If you’re looking to get out of your business, the last thing you probably want to do is pay an outside team to come in and help prepare for the sale, since it will only cost you money.
This is a critical mistake.
Recognize up front that you, as a business owner, are probably the worst person to negotiate your own account. You want an impartial third party that will look at the facts without emotional attachment.
With that in mind, don’t hesitate to assemble the right team to help with the process. If needed, bring on specialists who know how to deal with large buy/sell transactions.
7. Create an Exhaustive Letter of Intent
Finally, you should make sure you create a comprehensive letter of intent before you start a sale.
Everything you care about should be included in the letter. If everything is covered, it gives you much greater leverage in negotiations. For example, if a buyer’s team attempts to erode the deal, you can refer them to the letter–the buyer will have to justify signing a letter if they didn’t expect to honor the terms.
Thinking of Selling Your Business?
If you’re thinking of selling your business, the last thing you should do is make it up as you go along.
Instead, get an attorney on your side who knows their way around these types of deals. That’s where we come in. We’re experienced business lawyers who will help you chart the best course of action for your business.
How do you give to charity?
Do you sign up for direct debits, or give cash when asked? Maybe you open up your checkbook a few times a year to give generously to causes close to your heart.
If you give to charity on a regular basis, you might be surprised to learn that your giving could be more effective. A change in the delivery of your donation could send your contributions soaring. You might even continue earning money from your assets and save on taxes at the same time.
Charitable trusts aren’t just for multi-millionaires and billionaires. Planned giving vehicles give anyone with a philanthropic heart, opportunities to make a real difference.
Think your donations wouldn’t be better served by a charitable trust? Think again. Keep reading to see if one of these different types of charitable trusts can maximize your donation.
Charitable Remainder Trust (CRT)
A charitable remainder trust (CRT) provides a mechanism for donors to leave more money to charity and spend less on estate taxes.
CRTs are particularly popular among those who would otherwise face a high capital gains tax bill for a highly appreciated asset.
A CRT allows you to place the asset in the trust. Over the life of the trust, you continue to receive income from it either through annuity payments or percentage payments.
When the trust reaches the end of the term, the asset belongs to the charity named when you set up the vehicle.
In sum, the benefits of a CRT include:
- Continued income from an asset
- Lower estate taxes
- Significantly reduced or eliminated capital gains taxes
- Final donation to charity at the end of the trust
Overall, the tax incentives are the biggest attraction of a CRT, so you’ll want to enlist the help of a tax attorney to set it up.
Charitable Lead Trust (CLT)
Charitable lead trusts (CLTs) allows a person or family to donate assets into the trust before sending the funds on to one or more organizations listed by the donor. Think of them as the opposite of a charitable remainder trust (CRT).
In most cases, a CLT serves as a vehicle to provide donations but to also leave tax-free gifts to the family of the donor. When money goes unallocated at the end of a specified period, the CLT passes on the remaining gift to the donor’s family. Families do not need to pay taxes on the funds, and they do not qualify for annual gift exclusion rates.
Unlike other vehicles, you can’t write donations to the trust off from your taxes unless you own the trust and are the donor. If you meet these requirements, you qualify for one deduction to use only in the year of the creation of the CLT.
Be sure to ask your tax attorney about deductions if they are your primary motivation.
The benefits of a CLT include:
- A reliable stream of income for a charity
- Left-over assets remain tax-free
- Removal of limits on annual gift exclusion
Overall, the most significant benefit of a CLT is reducing the estate taxes dramatically.
Private foundations are the most recognizable vehicle for charitable donations. A private foundation offers the most control over the assets donated and the most flexibility in the assets donated. It can also exist in perpetuity rather than coming to an end after a set term or the death of the donor.
Private foundations work well for those who wish to direct their wealth and hold specific ideas about where and how the asset should be disbursed. A private trust can offer activities like:
- Direct charitable activities
- International grants and donations
- Charitable programs
Donors find that private foundations provide the most flexibility and opportunity, but they also cost the most to run.
The benefits of setting up a private foundation compared to a CLT or CRT include:
- Double capital gains tax benefits
- Sheltered income
- Expanded giving opportunities
- Direct philanthropy
However, there are also disadvantages to this vehicle. These include:
- Regulatory requirements
- Recordkeeping requirements
- Excise tax
- Ongoing legal and accounting fees
- Lower deductibility
- Less favorability on some capital gains
Still, if you amassed significant wealth early in life and intend to leave a legacy that outlives you, there’s almost no better means than a private foundation.
Pooled Income Trust
A pooled income trust is for those who intend to leave behind an estate but one that’s of lower net worth.
In a pooled income trust, you’ll create a “pool” with several donors and donations to generate a single large trust. Named charities then invest the money and pay out to the donors according to the amount each contributed to the trust.
Most pooled income trusts accept only liquid assets including stocks, mutual funds, and cash. Rarely do trusts of this type take assets like life insurance, fine art, real estate, or restricted securities. However, enough hunting may bear some fruit.
The benefits of a pooled trust include:
- Immediate income-tax deductions
- Limitation of federal estate taxes
- Avoiding probate on the remaining balance of the estate.
These trusts also exist for those who want to extend their retirement income while remaining at home. These pooled trusts pay for necessary monthly bills, and the balance remains with the nonprofit running the trust (or to Medicaid) after the donor passes away.
Finding the Right Types of Charitable Trusts
Charitable giving can benefit your community, country, and even the world – and it can benefit you.
Before cutting a big check or drawing up a will, consider beginning your philanthropic journey today. With different types of charitable trusts available, you’re bound to find one that meets your unique financial situation, your family’s needs and your desire to give back.
Do you want to include charitable planning in your estate planning? Get in touch with charitable giving experts today.
Estate planning is not just for retirees and the elderly – it is important for people of all ages. This is especially the case if you are married, have children, buy a house, or get an inheritance.
Making sure there is a plan in place for your children and your estate in the case of unforeseen circumstances provides the ultimate peace of mind.
This article explains the importance of creating a will and estate plan if you have young children. If you and your spouse die while your children are still minors, there are two fundamental approaches to solve the issue of the estate.
Firstly, with a will, you can leave your estates to your children in a custodianship. The custodian can be allowed to remain in charge of the children’s inheritance until they turn a certain, responsible age of your choosing.
Secondly, your wills can leave your estates to your children in something called a testamentary trust. With this, you can name a trustee to manage the trust and disburse the inheritance under conditions which you specify.
Another thing to consider is appointing a guardian and an alternative guardian for your minor children. This person will act as a surrogate parent, in that they will be in charge of setting the children’s residence, overseeing healthcare and education, and managing their funds that they may acquire while still minors.
Don’t wait another day – let us at Rhodes Law Firm help you make a plan for your estate today.
Avoid Common Estate Planning Mistakes
All too often, people make the mistake of not planning their estate properly and when they pass, their family is left to sort out the puzzle. This can frequently result in drawn-out, expensive court processes or even family feuds.
This article by Larry Light highlights three common estate planning mistakes and provides valuable information on how to avoid making them.
According to light, these three snares commonly trip up an estate plan:
• Lack of information
• Beneficiary designations done wrong
• Outdated plans
Consider all of the assets you will accumulate in your lifetime – bank accounts, fund holdings, etc. all are protected by user names, passwords, and security questions. The most important thing you can do is create a master roster that contains all of your user names, passwords, and accounts.
When bequeathing your assets, use common sense. According to the article, if you list someone in your will as the heir to your mutual funds, you must also file the person as the heir with the mutual funds company. “Your will won’t override what the designation is on your retirement account: Different people may be in the will and on the account,” writes Light.
Make sure to keep your will up to date, especially if you experience any major life changes such as divorce.
If you’re ready to start planning your estate, or if you have questions regarding estate planning, give Rhodes Law Firm a call today!
A special needs trust means that you can have valuable peace of mind that your child will be taken care of after you’re gone. It’s not an easy thing to think about, we know, but it is vital.
We would like to reassure you that setting this up now is a proactive, positive step. It is undeniably an emotional task to undertake, but you may find that it actually eases your concerns about your child’s future.
Setting up a special needs trust is a wonderful way to look after the wellbeing and happiness of your child in the future. Don’t be like the 6 out of 10 Americans who lack a will or estate planning. Read on for how to set up a special needs trust that can support your loved one in the future.
What is a Special Needs Trust?
A special needs trust (or supplemental trust) is a specific type of estate planning. It gives your child with special needs adequate financial provision for the rest of their life. It is particularly important for children who claim government aid or may do so in the future.
The Supplemental Security Income (SSI) and access to Medicaid are needs-based support. If someone owns or has access to assets of $2000 or more, they would become ineligible to receive that support. So if your child were to inherit your property or money upon your death, he or she could lose eligibility.
If you set funds aside with a special needs trust, they can keep their needs-based government support. This means they can maintain access to healthcare via Medicaid — often a significant concern.
Plus they can use the trust money for any extras that they need. This might include:
- Dental or vision care,
- Equipment such as wheelchairs, computers, cellphones
- Additional care or therapies
- Furniture and furnishings
- Recreational and fun activities
The goal of the trust is to enhance the life of the beneficiary, so that will guide how they use the money.
However, they cannot use the trust money for housing or food because that would also make them ineligible for the government programs.
How To Set Up a Special Needs Trust?
Setting up a special needs trust can be a complicated matter, so it is worth seeking professional advice. Specific wording is required to comply with ever-changing government regulations in this area.
If written incorrectly, your provisions could make your child ineligible for other vital financial aid that he or she needs (or might need in the future). So it is important to have this done by a qualified and experienced attorney.
Choosing Your Trustee(s)
A vital part of the process of creating a special needs trust is deciding who should be a trustee. This is the person (or people) who will administer the trust on behalf of your child. It is not the same as someone being the guardian of your child; it relates solely to the administration of the trust.
They play a key role in terms of the financial decisions that affect your child. So you want to choose someone whose judgment you trust. Your trustee’s role is to spend money to enhance your child’s life, whilst also making the trust funds last as long as they can.
It’s important that the trustees keep up to date on SSI and Medicaid law changes, to maintain eligibility. They also need to maintain records and file taxes on behalf of the trust and may need to invest trust funds as well.
Whilst you probably want a family member or friend who your child knows to be a trustee, it’s also worth considering a co-trustee from your law firm. That way you can be confident that your child’s eligibility for government aid is maintained and all legal aspects are taken care of.
Helping the Trustee to Help Your Child
The trustee(s) will work with your child’s guardian in your absence to make the best decisions for your child. You can set up the trust to come into effect after you pass, or you can set it up to operate now. In that case, you would be the current trustee and would name your successor trustee(s) to manage it when you’re gone.
Often people write a letter on behalf of the beneficiary of the trust (your child) to help future trustees understand their needs and preferences. This is especially important if your child is unable to communicate this clearly themselves.
This letter would include their personal, educational and medical history, their living situation, social life, religious beliefs and any other factors that you want the trustee to know. Understanding these factors will help the trustee to make decisions in your child’s best interests.
Interesting Financial Aspects
The trustee cannot give money directly to your child from the trust, but they can purchase items on behalf of your child using trust funds. So if your child needs new hearing aids, the trustee can buy these for them using money from the trust.
Another interesting fact about special needs trusts that you may not know is that anyone can contribute. Trusts are usually set up by parents for children, but actually, other family members or friends can contribute. Indeed, anybody may contribute.
Anything Else I Need to Know?
There are many interesting aspects to this area of the law, making it imperative to get proper advice. For example, did you know that when your child turns 18, you lose the natural right to be their guardian?
That means you wouldn’t be able to make healthcare or life decisions on their behalf after they turn 18!
You can avoid this startling situation by getting guardianship in place via the probate court. A qualified attorney such as ourselves can help you with this – ideally at least 6 months before your child’s 18th birthday.
We would be delighted to speak with you about getting your child safely set up for the future with a special needs trust. Please contact us at (706) 724-0405 for a confidential discussion.
Alternatively, we have several excellent workshops available online that you might find helpful. We invite you to watch them here.
When you’re grieving the unexpected loss of a loved one, expensive last-minute airfare costs
should be the last thing on your mind. But for many, this can mean having to decide between
financial strain and being near loved ones during a difficult time.
Million Mile Secrets has put together some useful tips and guidelines so you can be better
prepared should a difficult situation arise. These tips, such as taking advantage of bereavement
fares from certain airlines, accruing miles and points with credit cards, and booking last-minute
deals, can save you time and money during a difficult time.
Unfortunately, most major airlines no longer offer bereavement fares. Delta and Alaska Airlines
are the only two airlines that offer discounted ticket prices – usually around 10% – for those
who are traveling due to the loss of an immediate family member. To get this rate, you must
call the airline to book your flight. Each airline has its own limitations as to who is considered an
immediate family member, so make sure to check their website for a list before you reserve
Another great way to save yourself money and unnecessary stress is by taking advantage of
your credit card travel rewards. These are points or miles that can accrue each time you use
your credit card, which you can cash in for plane tickets, rental cars, hotel stays, and more.
Having some rewards saved up can help get you on a flight without you having to dip into your
hard-earned savings. There are a lot of credit cards and reward options out there, so it’s best to
do some research to decide which one best suites your needs.
Read the full travel guide here.
There are many types of trusts out there. Here are 6 basic types of trust documents that may be used for your estate plan.
Don’t worry. There’s no need to feel intimidated by the estate planning task.
Even if you have zero legal background or know-how when it comes to estate planning, we’ve got your back with this simple guide to each basic type of trust document you can choose from.
The Basics of Trusts
If you’re looking to create an estate plan, get started now as you can create a trust while you are alive and it will survive your death.
You can make up a trust in your will to be formed upon your death.
Basically, a trust is a right in property that is held in a “fiduciary” relationship by one party to benefit another.
For those who may be very new to any legalese here’s a quick breakdown of two important terms to familiarize yourself with before embarking on the task of estate planning:
1. Trustee- An individual or member of a board who is given control or administration powers over a property in a trust. They are legally obliged to administer that property solely for the purposes it was specified for.
2. Beneficiary- The person who benefits from the trust.
6 Types of Trust Documents for Your Estate Plan
While there are several types of trust documents, the two main categories are irrevocable and revocable.
From there, you can delve into more specified types of trust documents as listed below.
1. Gifting Trust (Irrevocable)
Often, these trusts are created to benefit family members, though sometimes unrelated parties may also be listed as beneficiaries.
Simply, a gift in trust, is a separate legal entity created to hold and receive gifts of property. This is another great method for reducing the taxable estate of the person giving the gift, (the donor).
Both the “gift,” and any future value of that property, is excluded from the donor’s taxable estate.
Gifts are given to a trust instead of straight to an individual so that the assets can be protected and distributed evenly as desired to beneficiaries, so they are saved from taxation, and to enable better financial planning.
Having a gifting trust created can speed up annual exclusion gifts to diminish a taxable estate faster.
2. Living Trust (Revocable)
In a living trust, your property is put into a trust during your life to benefit you and then transferred to your chosen beneficiaries upon your death.
The individual in charge of ensuring that transfer of assets is completed correctly is called a successor trustee.
One great benefit of a living trust is that it avoids probate, unlike simply having a will (that does require probate before assets are distributed). This can mean your beneficiaries receive their allotted assets more quickly.
A living trust may also save you money in the long run as your assets will not require time and expense that comes with going through probate. However, when you have your living will created, it does require a bit more than a will.
You must complete separate paperwork for a living trust, as opposed to a will, to transfer stocks, bonds, certificates, and bank accounts to the trust.
Sometimes considered a tax-bypass trust, a living trust is excellent for spouses who want to leave money to their spouse, but limit the amount of federal estate tax their spouse pays when the trust maker dies.
However, when that surviving spouse dies as well, the remaining assets above and over the exempt limit can be taxable to the couple’s children.
This can potentially lead to hundreds of thousands of dollars in taxes laid upon the children as that tax rate can reach as high as 55 percent. Luckily, a tax by-pass trust will prevent this and protect the children from taxation.
3. Asset Protection Trust (Irrevocable)
The main purpose of an asset protection trust is to ensure your possessions and assets are safe from any future creditor attack. It has all the benefits of a Living Trust, but it has the added protection of the assets from creditors INCLUDING long term care expenses. If set up properly, the creator of the trust can qualify for long term care government benefits. To gain protection, there has to be some sort of limitation to access to the assets, which differs for each situation. This trust also needs to be set up several years before the government benefits could apply, so pre-planning is necessary.
Asset protection trusts are usually set up in such a way so that they are irrevocable for a specified number of years, thus inhibiting the trust maker from being a beneficiary.
When the irrevocable number of years pass, the trust maker receives any undistributed assets back if there is no current risk of creditor attack.
4. Charitable Trust (Irrevocable)
A charitable trust ensures benefits to a specific charity or to the general public. Charitable trusts are helpful when tax time rolls around, as they often lower what you could pay for gift or estate taxes.
You can even do a charitable remainder trust. This can be funded during your lifetime and is useful for financial planning and the receipt of certain benefits to the trust maker.
5. A Life Insurance Trust (Irrevocable)
This type of trust is non-amenable and is created for those who are both the beneficiary and owner of one or several life insurance policies.
This basically means when the individual who is insured passes away, the trustee invests the insurance funds and administers the trust to beneficiaries.
If your trust owns insurance for a married individual, the non-insured spouse and any children are typically your beneficiaries.
You may also create the trust in a “second-to-die” method where children become beneficiaries only upon the death of both spouses.
The Life insurance trust is unusually used so that the life insurance proceeds are outside of an individual’s estate for estate tax purposes.
6. Special Needs Trust (Irrevocable)
If you have a loved one with special needs, you probably know that might qualify for certain governmental benefits or assistance.
Creating a trust with this loved one as a beneficiary is potentially tricky if you wish to include them as a beneficiary without hurting the benefits or assistance they receive from the government.
If this is your wish, then create a special needs trust. This is completely legal under the Social Security rules if the beneficiary cannot control the amount or frequency of the trust distributions.
This type of trust is especially useful for parents or guardians of a special needs child to ensure their child continues to receive all needed help and benefits if the parents or guardians pass away.
Start Your Estate Plan Today
Now that you have a basic understanding of the various types of trust documents you can create in your estate planning, get started today by finding an experienced attorney.
Become even more educated on estate planning and will creation by watching our free mini-workshops online.
So, you’ve established an estate plan. You may think you’re all set – that you have everything settled and prepared and you don’t have to worry about it anymore – but you would be wrong. According to this article by Forbes, a recent study shows that traditional estate planning will result in a 70% chance that your wealth will be lost by the second generation. If this reality concerns you, you should consider turning your estate plan into a legacy plan.
Legacy planning involves working with a team of advisors who will help propel you towards your goal of leaving a legacy behind for multiple generations. Unlike estate plans, legacy planning is more of a proactive process. While having a traditional estate plan is a good start, it should merely be used as the framework through which your legacy can evolve. Your legacy plan should be one that grows and progresses in sync with your life. Read more about the benefits of creating a legacy plan here.
Contact Rhodes Law Firm today to discuss your planning options.