A Trust Sounds Too Fancy For Me

I’m not wealthy, why would I consider a trust? This is meant to lay out what a trust can do and why it may be beneficial to consider. There are two broad types revocable and irrevocable. Revocable allows for changes throughout but, it also stays within someone’s estate, meaning it is not excluded from estate taxes. Setting up an irrevocable trust limits the ability to make changes but, any assets used to fund this trust will be excluded from someone’s estate.


Benefits to Revocable Trust

  • Bypasses probate
  • Assets go straight to beneficiaries(similar to life insurance and retirement accounts)
  • Maintains privacy
  • Allows for more control of assets after your death
  • For property owners it can add an extra layer of liability protection

Benefits to Irrevocable Trust

  • Assets are not subject to estate taxes
  • Easier to gift to charities
  • Income producing assets are not subject income taxes

Within those two broad trust types there are quite a few variations. Below are some of the most common that I deal with working with clients.

Special Needs Trust – Helps map out financially what happens to a family member who is disabled(mentally or physically). Can protect assets such as a home and still allow the individual to receive any government sponsored income they are entitled to obtain. It allows the trust to determine who they want to manage the assets as well as who would care for this individual.

Spendthift Trust – Mostly used in the case of minor children or for heirs that have not shown the ability to manage their money. You can stipulate the recipient receives a certain amount when they turn 18 or graduate college, etc. You can determine a regular monthly or annual amount they would have access to as well.

Charitable Remainder Trust – Provides tax advantages during your lifetime of gifting money to a charity and provides you with income. For example if you gift 25,000(preferably something with low cost basis) to a charity. That charity will receive that $25,000 once you pass away so it is considered a gift now and deductible. You also receive the income from that donation every year while you are living.

The estate planning world has a vast array of platforms to help families implement what they want to happen to their assets. As estate tax laws change financial planners must stay abreast of different nuances and how they impact a client’s financial situation. The key is periodically discussing your intent with your family and your trusted advisors to see if your goals match up with what you have in place and if there are estate planning vehicles that can benefit you.

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Brevity & Associates

Brevity & Associates