Why Trusts Should Be Part of Your Estate Plan

Trusts have long been a tool for the ultra-wealthy to preserve wealth and pass it down through the generations. However, even those of more modest means may benefit from this powerful estate planning tool.

Regular people have learned that they need to have an estate plan to protect themselves, while they are living and to distribute assets when they pass. Estate planning tools like a Power of Attorney and a Health Care Power of Attorney are basic documents anyone over 18 needs to have. Trusts, once the province of the wealthy, are now being used by people in many different economic levels, reports the Cleveland Jewish News in the article “Five reasons to incorporate trust into estate plan.”

Taxes. While it’s true that the exclusion for estates and prior taxable gifts is now $11.58Why Trusts Should Be Part of Your Estate Plan million per individual, most estates won’t be taxable at the federal level. However, don’t overlook state estate taxes. What if life insurance proceeds put your estate into a higher bracket? One way to keep the cap on your estate size, is with an irrevocable life insurance trust, also known as an ILIT. It will keep life insurance policy proceeds outside of a probatable estate and minimize the tax hit.

Asset Distribution. Your will controls who receives what assets, but not what happens to them after they are distributed. A trust can ensure that funds are used for specific purposes, such as higher education. It can also control how funds are distributed to an individual. If there are concerns about how an heir might mishandle an inheritance, perhaps because of an addiction or a lack of financial skills, a trust can be used for oversight into when funds are distributed and possibly under what circumstances. You can set benchmarks for trust distribution, like completing college or a rehabilitation program.

Privacy. Heirs are sometimes surprised when they, along with executors, start receiving solicitations after a loved one’s will is probated. That is because once a will goes through probate, the information is public record and available to anyone, including nosy neighbors, scammers or an estranged family member. A trust provides a layer of privacy. It can also do this while you are living. Certain information, like the ownership of a property, can be made less public, if the property is owned by a trust instead of an individual.

Making Estate Settlement More Efficient. Depending upon the jurisdiction, probate matters can take time. The court process does not always move quickly, and sometimes can be difficult to navigate. Probate can also become expensive. An executor or administrator of the estate is generally paid a percentage of the total value of the assets managed. But assets that are held in a trust do not go through the probate process and can be managed far more efficiently and quickly.

An experienced estate planning attorney will be able to determine what kind of trusts will be most appropriate and useful for your situation.

One of the main goals of our law practice is to help families like your plan for safe, problem free, and successful transfer of assets to the next generation.  Call our office today to schedule a time for us to review your estate plan and identify the best strategies for you and your family to ensure your legacy of love and financial security.  Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.

For more information and articles on estate planning, probate, trust law, and business planning, please visit our website and subscribe to our monthly e-newsletter.

Reference: Cleveland Jewish News (September 16, 2019) “Five reasons to incorporate trust into estate plan”

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