Providing Legal Guidance for Clients Wishing to Leave a Legacy
Trusts have increasingly become popular as estate planning tools due to the many advantages they can offer to those wishing to seamlessly transfer their assets to their beneficiaries after death. However, a trust may not be the right tool for everyone. The estate planning attorneys at King Law Office explain how trusts work, their pros and cons, and go over why it is important to work with an experienced attorney when setting up a trust for your estate planning needs. If you have questions about trusts or estate planning, contact the King Law Office at 530-221-2640.
How Does a Trust Work in Estate Planning?
A trust is a valuable estate planning tool that allows you to gain more control over how your estate assets are managed during your lifetime and distributed after you pass away. Unlike a will, which only becomes effective after your death and enables the transfer of assets in one single transaction, a trust works more similarly to a bank account or container for the assets you choose to place in it. The trust is funded with assets during your lifetime and managed by a person called a trustee.
Once funded, you can decide how and when your assets will be distributed after your death. For example, you can leave a certain amount of money for your family member but only allow them to access the money when he graduates from college or turns 21 rather than receiving it all in one single lump sum. Assets placed in certain types of trusts can also be shielded from creditors and allow for a quick transfer without the need for probate.
What Are the Different Types of Trusts Available?
There are a wide variety of trusts available for many different types of estate planning goals and needs. Trusts are categorized as revocable or irrevocable and are also further divided into living trusts and testamentary trusts, with dozens of different subcategories.
Revocable trusts can be changed, amended, or canceled at any time during the life of the grantor (the person who created and funded the trust). These trusts offer more flexibility but may be less advantageous in terms of estate taxes and asset protection. In contrast, irrevocable trusts cannot be easily changed or canceled after they are created, and the assets placed into them become the property of the trust.
A living trust is created and funded during the grantor’s lifetime, while a testamentary trust is created after the grantor passes away. A testamentary trust is usually established through the decedent’s will and may be funded with estate assets or life insurance proceeds.
Common examples of trusts used for estate planning include special needs trusts, charitable trusts, spendthrift trusts, AB trusts, insurance trusts, and generation-skipping trusts. It is always important to work with a professional in order to determine the right type of trust for your needs.
What Are the Advantages and Disadvantages of Adding a Trust to Your Estate Plans?
Like any estate planning tool, trusts have many advantages and some disadvantages that you should be aware of if you are considering adding a trust to your estate plans. First, a trust requires a significant amount of work and planning, which may come at a cost. If you choose a professional trustee to manage your trust, such as an attorney or financial advisor, you may also need to account for their fees.
In contrast, all the upfront work and preparation done during the trustor’s lifetime makes for an easier transfer of assets to beneficiaries when the time comes. Trust assets do not need to be probated, keeping estate matters confidential and allowing for assets to be passed to beneficiaries more quickly and in accordance with trust terms.
How Can I Determine if a Trust Is Right for Me?
If you are considering adding a trust to your estate plans, contact a skilled trusts attorney such as the ones at the King Law Office. Our firm can help you define your estate planning goals and determine if a trust is the right choice for you. Contact our law firm at 530-221-2640 to get started.