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Making the Most of Estate Planning Awareness Month
Estate Planning Awareness Month is observed every year in October. Throughout the month, citizens are reminded of the importance of estate planning by insurers, legal professionals, government officials, and others. During this time, you may benefit from learning what role trusts play in your estate plan.
While most people recognize the importance of drafting a will – even if the majority of Americans don’t have one – far fewer recognize the benefits provided by trusts. These legal arrangements can provide assets, support, and inheritance to beneficiaries in a way that offers many advantages over a traditional will.
During this Estate Planning Awareness Month, why not take the time to consider how trusts can benefit your estate plan?
Asset Management and Distribution
Like a will, trusts offer a way to manage and distribute assets. However, trusts often provide a higher degree of control. Rather than just passing on an inheritance to those you leave behind, you can dictate how and when your assets get distributed. In fact, this isn’t even something that has to take place after you’re gone. You can distribute trust assets to beneficiaries right now.
As the grantor, you will decide when your beneficiaries receive assets and if conditions will apply. For instance, many people want to stagger distributions over time. This is a useful strategy when beneficiaries are young children or lack financial responsibility. You can also put limits and requirements on whether assets will be distributed.
Put simply, trusts can play a major role in estate planning by granting a level of control that other legal instruments don’t come close to.
Probate Avoidance and Simplification
Many people opt to create a will with the belief that doing so will help them avoid probate. This is far from accurate. In fact, all wills go through the probate process to ensure estate administration is handled appropriately. This is a very public process. However, trusts are not handled in the same manner. Rather than going through probate, the distribution of trust assets is handled by the trustee and remains private.
Asset distribution via trusts also avoids many of the delays associated with probate. This will allow your beneficiaries to access their inheritance in a more timely manner. As if all these benefits weren’t enough, using a trust to keep certain assets out of probate will also greatly reduce the costs your estate will face. By simplifying or avoiding the process entirely, it’s possible to significantly reduce legal fees and court costs.
Protecting Beneficiaries
Another important role that trusts play in estate planning is the protection of beneficiaries. In addition to keeping matters private by avoiding the probate process, you can also garner a variety of situational-specific advantages. For instance, a special needs trust can provide financial assistance and supplemental care for disabled loved ones without potentially jeopardizing their government benefit eligibility.
You can also use spendthrift trusts to transfer assets to beneficiaries who may not be financially responsible. Such trusts protect assets from being squandered or seized by creditors coming after your heir. Trusts can even protect assets from being divided during a divorce or seized by creditors. This can ensure that your family’s wealth stays within the family. Even if this is the only thing you learn this Estate Planning Awareness Month, the effort will have been worthwhile.
Tax Planning Benefits
Another significant role that trusts can play in estate planning is minimizing and simplifying the taxes faced by your estate. For instance, irrevocable life insurance trusts (ILITs) and bypass trusts could greatly minimize estate taxes. It’s important to seek experienced legal assistance to ensure these are structured properly.
Certain trusts can also help manage income taxes more effectively by spreading income among beneficiaries or deferring tax liabilities. Again, this requires careful planning. With the proliferation of do-it-yourself legal websites in recent years, many people believe they can undertake this complex legal process on their own.
While this certainly is an option, keep in mind that even simple mistakes can make legal documents invalid or result in unforeseen outcomes. If there’s one thing that people should learn this Estate Planning Awareness Month, it’s that the upfront cost of seeking legal assistance can result in significant savings in the long run.
Planning for Incapacitation
Many people believe estate planning is all about transferring assets when they leave this world. However, trusts also play a role in estate planning by offering a chance for grantors to plan for incapacitation. By placing your own assets into a trust while you’re still living, you can maintain control over the money and property you own.
However, you can also specify what you want to happen with your assets in the event that you become incapacitated. If this unfortunate event happens, you can designate a person as a trustee who will step in and manage your affairs without having to go through the process of assigning a court-appointed guardian.
The Importance of Legal Assistance
There are many roles that a trust plays in estate planning, and that’s why everyone should consider creating a trust. In addition to the roles already discussed, a trust can also help with business succession planning, charitable giving, providing for minor children, and reducing potential conflicts in blended families. With so many benefits, it’s important to ensure you’re handling the legal process appropriately.
The best way to do this is by seeking legal assistance. While an attorney will have upfront costs, the financial benefits in the long run are worth the initial investment. Simplifying probate, avoiding costly mistakes, and understanding how the legal process will play out can be invaluable during estate planning. Creating a trust can serve many roles in your estate plan, but only when it’s done correctly.
At the Law Offices of Shannon C. Smith, our legal team is here to make sure your best interests are catered to. Contact us at 859-414-0543
today for a free case evaluation.
