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Posted on April 11, 2023 in estate planning,trust
Estate planning is the organization and management of your lifetime assets. It involves deciding how your wealth and property will be distributed to your beneficiaries. One legal tool that has gained popularity in recent years for its flexibility and utility in estate planning is establishing a trust. Trusts offer several benefits that can help you manage your assets more effectively, safeguard your wealth, and ensure your loved ones are cared for after passing.
A trust is an official legal arrangement that allows one person, known as the trustee, to hold and manage assets on behalf of another person or a group of people, called beneficiaries. The person who originally creates the trust is called the settlor or grantor.
Trusts can be created during the settlor’s lifetime (inter vivos or living trust) or after their death through their will (testamentary trust). They can be revocable, meaning the settlor can change or terminate the trust during their lifetime, or irrevocable, meaning the trust cannot be altered or terminated without the beneficiaries’ consent.
There are several benefits of having a trust as part of your estate plan:
The different trusts you can choose from include:
A: The most suitable trust for estate planning depends on the individual’s specific needs and objectives. A revocable living trust is often recommended for its flexibility, allowing the settlor to retain control over their assets and make changes or terminate the trust as needed. However, irrevocable trusts may be more appropriate for those seeking greater asset protection and tax benefits.
A: While placing your house in a trust has several advantages, there are also some potential drawbacks to consider. For instance, transferring your house into an irrevocable trust means you no longer have direct control over the property, which may be undesirable for some homeowners. Establishing and maintaining a trust can involve legal fees and administrative costs. Lastly, placing your home in a trust may impact your eligibility for certain property tax exemptions or mortgage-related benefits.
A: A trust can impact taxes in estate planning in various ways, depending on the type of trust used. For example, an irrevocable trust can provide estate tax benefits by removing assets from the settlor’s taxable estate, potentially reducing the overall estate tax liability. Additionally, some trusts, like charitable remainder trusts and charitable lead trusts, can offer income tax benefits for the settlor or beneficiaries.
A: Selecting the right trustee for your trust is a critical decision. The trustee is responsible for managing the trust’s assets and ensuring the assets are distributed according to the trust’s terms. When choosing a trustee, consider trustworthiness, financial responsibility, and familiarity with your wishes and values. Many people choose a trusted family member or friend, while others opt for a professional trustee or financial institution to provide an unbiased, experienced perspective.
If you need assistance setting up or managing a trust, the legal professionals at Ken R. Ashworth & Associates can help. We have decades of experience helping clients with their estate planning needs. Contact a Vegas estate planning attorney today to schedule a consultation.