Trusts-a Quick Overview
Trusts Can Be Beneficial Tools For Many Families
While you may think trusts are only for the very wealthy, they are a great legal tool for managing and protecting your assets. Our trust attorneys help you through the process of creating a trust that will best protect your family and your assets. If you are interested in the protection and tax savings that many types of specialized trusts can provide, TrustCounsel’s experienced team can guide you and make certain your assets and beneficiaries are protected.
Revocable Living Trusts
Revocable living trusts are popular estate planning tools for transferring assets at death. The primary advantage of a revocable living trust is probate avoidance. What is probate?
Probate is the court-supervised proceeding for dealing with ones’ assets and any creditors after one dies. It involves a lot of time, trouble and expense. The major expenses are legal fees for compliance with court requirements and court costs. To avoid these problems, you can transfer assets during your lifetime to a revocable living trust. Doing so reduces the likelihood of time-consuming and costly probate administration.
When a person dies and the probate process starts, the will is filed and becomes part of the public record. Revocable living trusts are not filed with the court. This means your assets, beneficiaries, and distribution provisions remain private.
Speed of administration is another great benefit of revocable living trusts. Shortly after your death, your successor trustee will have the authority to manage the trust assets, free from court requirements and backlog. In some cases, this can avoid many months of delay.
Revocable living trusts also provide for ease of management of for your assets in the event you become incapacitated and unable to care for yourself. Your successor trustee will administer the trust for your benefit, managing assets and paying your expenses. This can avoid the necessity of instituting a guardianship or limitations involved in the use of a power of attorney.
People are often concerned by the term “irrevocable trust”. Yet, despite the name, irrevocable trusts can often be modified.
Irrevocable trusts share benefits with revocable trusts. Irrevocable trusts avoid probate, keep your asset and beneficiary information private, and can provide for speed of distribution.
A major advantage of some irrevocable trusts is that your assets do not count toward the total value of your estate for estate tax purposes. This happens because you no longer own your assets as an individual – the trust owns the assets. When you die, those assets are property of the irrevocable trust and are not subject to estate taxes. TrustCounsel attorneys can ensure your irrevocable trust is set up correctly to protect your assets and beneficiaries from the claims of creditors or divorcing spouses.
Domestic Asset Protection Trusts
In some states, a domestic asset protection trust (DAPT) can offer protection from creditors. DAPTs are irrevocable trusts that permit the settlor of the trust to be a discretionary beneficiary. DAPTs are usually combined with one or more Limited Liability Companies, which are funded with assets such as cash, business assets, real estate, and securities. While North Carolina, Florida and New York do not have DAPT laws in place, with proper planning residents of those states can still take advantage of a DAPT set up in another state, such as Nevada, Delaware or Tennessee.
Irrevocable Life Insurance Trusts
Did you know the IRS includes life insurance proceeds in the value of your estate? This can cause the proceeds to be subject to estate tax. But you can avoid this with an irrevocable life insurance trust, commonly called an ILIT.
The ILIT must be the owner and sole beneficiary of the policy. The ILIT then provides for distribution or continued management and protection of the proceeds of the life insurance policy as you deem appropriate.
This process is seemingly simple but it requires the knowledge and skill of an experienced attorney to properly structure the trust and titling of the policy.
Special Needs Trusts
Special Needs Trusts, commonly called SNTs, are trusts set up specifically for the benefit of a disabled person who is receiving needs-based governmental benefits. A trustee is appointed to manage and distribute the assets of the trust, taking into consideration the life needs of the beneficiary. SNTs are established for many reasons and are an efficient way to make certain your disabled loved one is properly cared for both during and after your lifetime.