Benefits of Using a Trust in Estate Planning
Estate planning is a necessary step for all individuals to consider, especially those who have dependents, accumulated assets, and other personal property or wishes they want to protect. Among other things, estate planning takes into consideration how your assets will be divided among your loved ones after you pass away.
One aspect of estate planning that offers a great deal of unique benefits is a trust. Understanding how a trust works and why it might be a good option for your family is critical when you are considering your estate planning wishes.
What Is a Trust?
A trust is a legally binding document that is drafted by an attorney. A trust outlines how your assets and other belongings will be managed both during your lifetime and after your death. Additionally, trusts are designed to support and help the people you love in the event you pass away or are unable to do so when you are still alive. In drafting a trust, a trustee will be named. The trustee ensures that the execution of the trust is according to your wishes.
What Are the Benefits of Using a Trust?
There are many advantages to incorporating a trust into your estate planning. Additionally, there are many more advantages when you compare a trust to a will. Below are some of the main benefits you can take advantage of.
1. Privacy and Simpler Distribution of Assets
When a will is in effect, all assets that are controlled by your will have to go through probate in order for them to be distributed according to your wishes. Additionally, a will become part of the public record available for anyone to see.
Trusts have the advantage that they don’t need to go through this process. Additionally, trusts offer more privacy and protection than a will. Because a trust only involves your attorney and the named trustee, these are the only two individuals along with any other beneficiaries who might have knowledge about your trust and the details associated with it. Along with this, avoiding the probate process allows assets to be distributed much more quickly and in a more streamlined manner if they are in a trust as opposed to a will.
2. Trust May Offer Tax Benefits
There are revocable trusts —ones that can be amended after they’ve been created, and irrevocable trusts —ones that cannot be amended.
When establishing a revocable trust, you may be able to avoid transfer tax on assets that move from one hand to another. Assets that are left in a will or revocable trust are generally subject to the estate and gift tax that applies to individuals with very large estates (in the several millions). Under certain conditions, the assets and any appreciation on those assets that are in an irrevocable trust may be able to avoid estate taxation after your passing. These trusts can be especially valuable tools for people with large estates.
3. Trusts Offer Greater Flexibility
One of the biggest advantages of a trust is that you can include specific parameters regarding your assets and their named beneficiaries. For example, you can outline parameters that any money in the trust be given to grandchildren when they reach a certain age. Additionally, you can detail that certain monetary amounts can only be used for certain things such as tuition payments, or a down payment on a house. Additionally, you can set parameters on how much money a named beneficiary can receive from their trust during a set period of time.
4. Revocable Trusts Can Serve Your Family Even When You’re Still Living
In the event that you become incapable of managing your own finances, whether it be because you have fallen ill or have gotten into an accident, a revocable trust can be executed even when you are still living. Unlike a will that can only go into effect after you pass away, a revocable trust can begin to distribute funds on your behalf in order to support your family.
If you have a child with special needs, a trust ensures that care continues for them even when you personally are unable to care for them. A revocable trust allows your family to continue with everyday financial necessities including bills and medical payments as well.
5. Revocable Trusts Provide Flexibility
Perhaps the greatest benefit of a revocable trust is that you get greater flexibility with how your finances and assets are managed in the event you can no longer manage them. Flexibility comes in the form of being able to make amendments to the trust at any time. As your life changes so too do your interests, life goals, and final wishes. Being able to add and take away beneficiaries from your trust along with adding and taking away assets allows you to have a tool for estate planning that is adaptable to your changing life.
Seeking Out Legal Guidance For Your Estate Planning
The experienced Vancouver estate planning attorney John Lutgens is committed to helping you and your family stay protected when the unexpected happens. To learn more about trusts and whether they are a good estate planning tool for your family, reach out to our experienced estate planning attorney today to schedule a free case consultation.