Estate planning can be a complicated process because everyone’s situation is unique. A cookie-cutter process for managing an estate is never a good idea. Creating a trust, sometimes called a living trust, as part of your estate plan can be a vital way to manage assets while you or a loved one is still alive yet wanting to give some of your wealth away to relatives, loved ones, or nonprofit organizations.
Find out when you need a trust or a living trust from the financial advisors at IntentGen.
Privacy
A living trust is a legally binding document. However, a living trust is not made a public record unlike some instances of a last will and testament. You’ll have more privacy with a trust, and the executor(s) of that trust will manage the disbursement of funds through the trust funds you designate. The only thing you need to do once a living trust is in place is to keep the funds in place to fulfill the obligations of the trust.
Providing for Individuals Who Need Extra Care
A living trust allows you to disburse funds to someone who needs extra care, either due to a disability, and they can’t take care of themselves or a loved one who needs long-term care as they age. Healthcare and disability care costs can get expensive, and a living trust can help mitigate the money needed to take care of someone with a long-term health issue. Consider helping to pay for in-home care, assisted living, or independent living if a relative needs some extra help living their daily lives.
Avoiding Hangups in Probate Court
A living trust leaves no doubt as to your intentions for distributing and preserving wealth for the next generation. Two basic principles are needed for a trust: The funding and someone to manage it. Both aspects can be set up through a legally binding document that shows who manages the wealth (executor or trustee) and how the trust is funded.
A probate court usually (but not always) gets involved when there are questions about how your wealth should be distributed. The trust eliminates those questions as to your intentions.
Giving Financial Help to Minors or Loved Ones Who Cannot Manage Finances on Their Own
Creating a living trust offers a great way to distribute money to minors or loved ones who cannot manage their finances on their own. The trustee determines how much and when to give money to your inheritors.
For example, you have a 17-year-old loved one who isn’t quite ready for a large inheritance from your trust fund. The trustee, per your wishes, distributes $250 a month until that person graduates from college whereby the allowance goes up to $2,000 a month. In this instance, your living trust can be incentivized.
Reducing or Eliminating Estate Taxes
Depending on where you live or how much your estate is worth, a living trust can reduce or eliminate estate taxes. For 2023, no one pays federal taxes on estates worth less than $12,920,000, so the bar is set relatively high for trust funds at the federal level. Working together with a financial advisor offers a great way to determine the tax advantages of distributing your wealth.
Consult With a Financial Advisor to Assess Your Situation
The best way to determine a viable way forward for distributing your wealth is to get sound advice from a finance professional. Contact us for more information. We’ll help you navigate the financial aspects of distributing your wealth as you see fit.