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Most people want to ensure that their families will be taken care of after their deaths, but it is not always easy to know how to make that a reality. Establishing a trust is a great way to ensure your loved ones are provided for and receive the correct assets. However, navigating the world of trusts can be difficult, so working with an experienced estate planning attorney can provide valuable guidance and peace of mind.
A trust is an agreement put in place to maintain certain assets, such as real estate or other funds, for a time until they are given to the proper individuals. They are a reliable way to ensure that assets are protected and distributed properly in the event of a person’s death. These agreements involve three parties: a grantor, a trustee, and a beneficiary.
The grantor is the individual establishing the trust. They will choose what assets to include and who will receive those assets. The trustee is a third party, though in some cases, it can be the grantor, who is responsible for holding the assets. This person has permission to distribute the assets when the time comes. Finally, the beneficiaries are the individuals who receive the assets. Depending on your needs and circumstances, you can establish trust in several ways.
There are several different types of trusts, including marital and charity centered, depending on the needs of the grantor. Every trust will fall into one of two categories: revocable or irrevocable.
A revocable trust, also called a living trust, is established during your lifetime to protect assets and create a plan in case you are incapacitated. The specifics of this trust can be changed while you are alive. The individual who establishes a revocable trust is often the trustee during their life but can name a new trustee in the event of their death. Revocable trusts keep assets out of probate at the end of your life, but they will be subject to taxes while you are living.
An irrevocable trust is often created to support others, such as children or grandchildren. These are not as flexible and cannot be changed at all once they are established. One benefit of an irrevocable trust is that it will often help you avoid probate and provide a tax break because you have no control over assets in an irrevocable trust.
There are several steps you will need to take to establish a trust.
Each step of the process will take a great deal of planning and attention. Of course, you want to ensure that the document is crafted properly and that all your assets are divided the way you want them to be. This can be a daunting process, but the team at Ken R. Ashworth & Associates will work with you every step of the way.
You are able to decide what assets will be included in your trust, including bank accounts. When you are deciding what accounts to incorporate into your trust, it is important to consider if and when you use them in your daily life. Checking accounts, for example, can be part of a trust, but transferring ownership of the account may cause problems if you use it to pay your bills. Other accounts, like safety deposit boxes or annuities, will also need an official ownership change, but that may be more manageable. The best practice is to determine what division of assets works best for you and your family.
A: When you are creating a trust for your loved ones, it is important to include any assets that you believe will benefit them the most. However, some things should not be included in a trust. For example, some assets that are rarely placed in trusts are vehicles you use daily, retirement accounts, and health or medical savings accounts. When placed in a trust, these assets create unnecessary problems, so it is best to leave them out of your trust.
A: The specific accounts that will be included in a trust are always determined by the individual establishing the trust. While some accounts, like retirement or health savings, should not be included in a trust, there are several account types that are beneficial. Some of the most common accounts included in a trust are safety deposit boxes, stocks and bonds, checking or savings accounts, and annuities. Again, working with your attorney to determine which accounts you should include in your trust is best.
A: Providing funds or assets for your trust accounts does not necessarily mean that you will have to establish an entirely new account. However, depending on the type of account, you will likely be required to complete paperwork to transfer ownership. For example, bank accounts will have to be retitled, while stocks and bonds will require a change of ownership. Regardless of the type of account, an official transfer of ownership or title will be required.
A: An account in trust is any account that has been established by an individual for the benefit of another person. Like all trusts, these accounts have a trustee responsible for managing them until they are given to the beneficiary. Many of these trusts, like a Uniform Gifts to Minors Act account, are established to provide financial support to children or grandchildren once they reach a certain age. Escrow accounts and accounts that are accessible in the event of someone’s death are also considered accounts in trust.
Contact Ken R. Ashworth & Associates today to get your estate planning started.