Trusts are some of the most popular methods of transferring assets to beneficiaries. Many people prefer trusts because they allow them to leave the management of their assets to trusted individuals and may help reduce tax liabilities. If you would like to establish a trust for your assets, our estate planning attorneys can help you through the legal processes.
What Is A Trust?
A trust is a fiduciary or agency relationship where a trustor or grantor confers the trustee with the right to hold and manage assets on behalf of the beneficiaries. The beneficiaries may be the spouse, children, or other family members and friends of the trustor. Most trustors also act as trustees until death.
Types of Trusts
Trusts are split into two major categories of revocable and irrevocable trusts. There are several other trusts, but they fall under two categories.
Revocable trusts allow the trustor to maintain control of assets during their lifetime. In addition, the trustor can dissolve or change the management of the assets under the trustee’s control if necessary. For example, the trustor can change the assets under the trust after acquiring new properties or going through a divorce.
A revocable trust offers you flexibility since the transfer of assets and management policies do not become permanent until after your death. The trustor can name themselves as the trustee or co-trustee or choose a successor trustee after death or incapacitation.
Irrevocable trusts can’t be changed or modified once they have been established. This means that the trustor can’t make changes to the assets or management structure once the assets have been transferred.
While this might seem to be a disadvantage, the benefit is that irrevocable trusts can be used to create a safeguard that protects assets from claims by creditors. In addition, an irrevocable trust can save you taxes by removing some assets from taxable property and income. This may be an option if you have an extensive portfolio and need to minimize tax liabilities.
Special Needs Trusts
Special needs trusts are formed to perform a specific purpose or manage certain assets that the trustor may want to separate from the other assets.
Life Insurance Trusts
A life insurance trust is an irrevocable trust that the trustor creates to hold life insurance proceeds. These proceeds then go to a trustee after death to manage them on behalf of the beneficiaries. The benefit of creating a life insurance trust is that it enables you to avoid estate taxes on life insurance payouts.
Charitable trusts allow you to donate some of your assets or the proceeds to charity. Charitable Lead Trusts facilitate the transfer of certain assets to specific charities, with the rest going to the beneficiaries. Charitable Remainder Trusts allow the trustor to receive income from assets for a period and transfer the remaining assets or income to a designated charity.
Marital trusts are established by one spouse to benefit the other spouse. When the trustor dies, the assets in the trust and any income generated go to the surviving spouse. Marital trusts allow the surviving spouse to avoid paying estate taxes on the assets in the trust during their lifetime.
Benefits of Trusts
- Transfer assets without going through probate
• Ensures assets are managed by qualified and experienced trustees
• Opportunities for reducing tax liabilities
• Sets aside assets for emergency needs
• Establish requirements beneficiaries must meet to receive the inheritance
Trust and Estate Planning FAQs
What types of assets can I put under a trust?
You can transfer many types of assets to a trust, including land, investments such as stocks, life insurance policies, and collectibles.
Can creditors access assets in the trust?
Even though creditors can legally claim assets in a trust, there are means to limit the creditor’s claims to property.
Contact us Today
Trusts are a great way of ensuring that competent persons manage your estate after death. You can establish different types of trusts depending on your needs and circumstances. If you would like to establish a trust, our experienced estate planning attorneys can help you. Aramjoo Law Firm serves clients in Liberty, Kansas City and all of Missouri. Contact us today for a consultation.