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Trusts: Your Key to Protecting Assets and Passing on Wealth

By: Stephanie Roque

A trust is an estate planning tool and legal arrangement in which a person, a grantor, transfers legal ownership of assets to a trustee, who manages those assets on behalf of one or more beneficiaries. Sometimes the grantor and the trustee are the same person. Sometimes the trustee is another person or a corporate fiduciary. A trust ensures that the grantor’s assets are distributed to the right beneficiaries.

There are a few reasons why you should include a trust in your estate planning, including:

1.      Asset Protection

2.      Probate Avoidance

4.      Tax Planning

Asset Protection

Not every kind of trust protects your assets, so it’s important to ensure you are choosing the kind of trust that is right for your estate planning goals. There are two main types of trusts: a revocable living trust and an irrevocable trust. Having your own revocable living trust does not protect your assets while you are still living. However, when you die, the existing revocable living trust becomes an irrevocable trust, as you can no longer make any changes. Irrevocable trusts cannot be altered and are beyond the control of the creditors of your beneficiaries, thus protecting your assets. With an irrevocable trust, assets cannot be taken by the beneficiaries’ divorcing spouse, bankruptcy trustee, lawsuit creditor, or nursing home.

Probate Avoidance

When assets are transferred into a trust, they are legally owned by the trust rather than the individual. Since the trust does not die, the assets held within it typically do not go through probate upon the death of the grantor. Avoiding probate is ideal because it saves time and money as probate can often come with many lengthy hurdles and fees that pile up. Additionally, avoiding probate ensures the protection of privacy since probate proceedings are public. In contrast, privately distributing assets through a trust keeps financial affairs confidential.

Control and Flexibility

A revocable living trust gives you the most flexibility over your assets by allowing you to transfer ownership of your assets to the trust and retain control over them. The grantor of this kind of trust can add or remove assets from the trust, change the trust, or dissolve the trust at any time. Within a trust you can also specify any special arrangements you would like for the distribution of your assets, like staggered payments, for instance.

Tax Planning

Trusts can sometimes help you pay less in taxes. Irrevocable Trusts are particularly helpful for estate tax planning for large estates as they move assets into a trust and out of your estate, which reduces the size of your estate, and subsequently, the amount of estate taxes your estate must pay. There are other benefits for reducing income and gift taxes when using irrevocable trusts which can be explored with your lawyer & tax advisor.

Trusts serve as highly beneficial tools for estate planning, facilitating the efficient and private distribution of assets in alignment with your desires. You will need to consult with an estate planning legal professional to ensure that your documents are prepared accurately and in accordance with the law and that your assets, family situation, and goals are reviewed, and a comprehensive plan is carried out. If you are a Florida resident, contact Lauren Richardson Law, PLLC to get help with establishing your trust today!


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