Many people have preconceived notions about trusts and believe that they are only for high net worth individuals who wish to leave large trust funds to their children. However, this preconception is far from the truth. Rather, trusts can be invaluable tools in the estate plans of millions of people.
Trusts simply provide an arrangement where one party holds property on behalf of another party. Specifically, the Settlor of the trust authorizes another person, the trustee, to manage the assets for the benefit of a third party, the beneficiary. There are many reasons for establishing trusts including capital gains tax minimization or providing for the needs of underage or special needs beneficiaries. Some typical trusts beneficial in estate planning include:
- Revocable Living Trusts. When these trusts are not only created, but also, fully funded with a client's probate assets, these trusts allow a person greater control of their estate administration during their lifetime, greater safeguards as to the inheritance transferred to beneficiaries against risk concerns and creditors, and these trusts also provide probate avoidance - including across state lines!
- Trusts for minors. Many people leave money to their children or their grandchildren in a trust as part of a comprehensive estate plan. This is typically done to ensure the money is there for the children's benefit while they are younger-for health, education, medical expenses, and other support items. Once the children reach a certain age or achievement level (such as beginning a career, or buying a first home), they may receive money from the trust.
- Special needs trusts. Special needs trusts enable a person to leave property to an individual with special needs. Many individuals with special needs receive government benefits. If they were to suddenly inherit money, they would be disqualified in most cases from those benefits until the inheritance was spent. Special needs trusts protect those individuals' government benefits while allowing them to have money for any extras they may need.
- Irrevocable life insurance trusts. Irrevocable life insurance trusts (or ILIT's) can be used in order to move a person's life insurance proceeds outside his or her estate for estate tax purposes.
- Spendthrift trusts. Spendthrift trusts are generally established to protect the beneficiaries' assets from both themselves and creditors. These trusts usually have an independent trustee which has complete discretion over the distribution of assets of the trust.
- Pet trusts. Many people want their loving companions to be fed, cared for, and to receive medical attention. We can work with you to establish a plan that manages your pet's care and funds for your pet.
Many different types of trusts exist and each can be customized to serve a valuable purpose in accomplishing your estate plan. Tournet Estate and Elder Law Group will assist you in outlining your goals to determine the best vehicles to preserve your wealth, legacy, and intent.