A trust can play an essential part in your estate plan and give you flexibility in your decision-making about your future. What are the benefits of a trust? Because trusts are so important, it’s good to understand more about them and how they may help you and those you love.
Generally speaking, a trust is a three-party contract. It outlines how you want to manage your assets and covers any requirements for loved ones who need future care and support. It’s an arrangement in which you as the creator of the trust (also known as the trustor, grantor, or settlor), give someone, a “trustee,” legal ownership of your assets and responsibility to handle them for the benefit of others (beneficiaries).
Depending on the purpose of the trust, the trustor, trustee, and beneficiaries can all be the same person or different people.
How a Trust Protects Your Assets
Under the terms of the trust, as you and your attorney outline them, you can specify what will happen to your property during your lifetime and after your death or disability. You can name exactly who will get your assets and when. For example, you may require that minor children reach a certain age or meet specific conditions to receive your assets. You may also state how you want to care for beloved family members, including pets. You can also use the trust to protect your assets from creditors or other parties who could otherwise lay claim to your property.
A trust avoids probate, a public court proceeding to distribute a deceased person’s assets. Probate may be long, costly, subject to conflicts over inheritances, and require repayment of any debts you owe, which could deplete your assets. A judge could also overrule your decisions, which is less likely to happen under a trust. Trusts simplify your estate planning, allowing for a private transfer of your assets according to your desires while you spare your family the problems of court proceedings. A trust also gives you peace of mind that your family will know what to do if you die or ever become incapacitated. In the event of your mental incompetence, any of your assets held outside of a trust may be open to potential theft. A well-written trust can appoint a trustee who has a fiduciary duty, an obligation to act in your best interest, to shield your assets from possible intrusions, fraud, or abuse.
You may also set the terms of the trust to start immediately to let you assemble a long-term plan. When you fund the trust, you need only review it occasionally. It gives you more flexibility and security than a will alone.
Trusts can also reduce or remove estate tax liability. Depending on your situation and the states involved, your family might not have to pay a state estate tax. Though some Georgia estates may be subject to federal taxes, those worth $11.4 million or less (as of the tax year 2019) are exempt.
How We Can Help You With Your Trust
You have many options under a trust, and as such, several different types are available. To make sure you choose the right trust for you and your needs that will be updated to reflect life changes and current laws, contact The McGarity Group today. We’ll be there for you throughout your estate planning.