Did you know that 67% of Americans don’t have trusts or estate plans? This means your assets and loved ones are left unprotected after you pass away. To help make sure this doesn’t happen to you or your family, we’ve rounded up everything you need to know about estate planning, durable power of attorney, and more.
In this article, we will discuss the most common types of trusts and how they help in planning for/protecting your children. We’ll also explain why it’s important to talk with an estate planning attorney. Let’s jump in and see which type of trust makes sense for you and your family.
What is a Trust?
Trusts are tools designed to help you manage your assets and protect them for your beneficiaries. There are different types of trusts that can be used with different goals in mind. A trust is a contract between the person who creates it, the one who controls it, and the beneficiaries.
The Grantor is the person who creates the trust. The Trustee is the one who controls it, and the beneficiaries are the ones who are entitled to the benefits of the trust. This is often a spouse, children, or grandchildren.
Trusts are also used to handle plans for a business after the owner passes. Businesses, assets, property, and more all come with a plan for your partners and family members.
Benefits of a Trust
The benefits of a trust are almost endless. Without one, this leaves your assets unprotected after your death. Your assets, children, or grandchildren are left confused, unprotected, and without a plan.
A trust gives you asset protection, planning for a child with special needs, and asset management in the case of young children or those who aren’t equipped to handle money. In a 2nd marriage, you can also protect assets after your death.
A trust will also give you privacy. Without a trust, your affairs are open to the public in probate. This allows for no court intervention, and your trust is handled by your trustee. You get to lay out all your wishes after your passing or a disability.
Revocable Trust or a Living Trust
A revocable trust is a legal entity that you create and control. You can change the terms of your trust at any time, making it ideal for people who want to keep their finances private. A revocable trust is also known as a living trust.
A revocable trust allows you to name someone else as trustee. The trustee is the person who manages the assets. You can also have a co-trustee alongside another person.
A revocable trust is also used in some cases as a will substitute. This keeps you in total control over your assets while you’re living. After your death, you would have given instructions for your assets and beneficiaries.
What is an Irrevocable Trust?
An irrevocable trust is one that cannot be changed once it’s been set up. This means that you can’t remove assets from the trust or change any of its terms, such as who will receive distributions and how much they’ll receive. Speak with your attorney to determine which trust works best for you.
You might use an irrevocable trust if you want to provide lifelong support for your children or grandchildren. This is a great option if you don’t want them to have access to their inheritance until they reach a certain age.
You could also use an irrevocable trust if there’s a possibility that someone might try to take advantage of your generosity by asking for money early on in life. This happens during a divorce, job loss, or if another child faces an emergency.
The Difference Between a Trust and a Last Will and Testament
Without a will, your assets get distributed according to state regulations. In this case, your loved ones won’t always receive your assets. If you have certain assets that are in your name alone, those assets may pass to your loved ones after your death when you leave a will.
You always want to use an attorney to make sure your will is written correctly. Protect the ones you love by creating a trust within your will. This protects them from tax liabilities and creditors. A written will gives you and your family protection and makes your wishes known.
Unlike with a trust, your will goes through probate. This process uses the court to divide your assets and property. This saves your family a lot of time and money wasted in court.
Why Do You Need a Trust?
One of the biggest benefits of using a trust is to avoid probate. When you pass away, your estate will be subject to probate court before it gets distributed to your heirs. Probate is a long and costly process that involves court hearings, attorney fees, and other expenses.
Without a trust, there’s no guarantee that all of your assets have protection during this probate time period. By contrast, when you leave an asset in trust for beneficiaries, the trust avoids probate because it’s considered private property.
A trust also keeps your assets protected from creditors or lawsuits against you. The trust also protects the beneficiary’s ability to manage their inheritance. You can pass assets without tax implications on death, which is a huge money saver for your loved ones.
Hire a Trusts Expert Today and Protect Your Family and Assets
Deciding what to do with your assets after your passing is a big decision. If you want to learn more about the different types of trusts, contact us today. We are here to answer any questions you may have and help you make the right decision for your situation.
You don’t have to go through this process alone. Let our experts help with trusts, wills, power of attorney, and more. Make a plan for when the unimaginable happens.
Fill out the contact form here to get in touch with a local trust attorney at Rhodes Law Firm, PC. Don’t put off this important life milestone any longer.