How Trusts Can Help Protect Your Assets
Having a solid estate plan can bring relief in your later years by providing peace of mind that your wishes are clearly stated and that those left behind will know what to expect. While a good estate plan has several parts and may make use of different tools, the trust is one possibility that is often overlooked but can be very helpful in many cases. Keep reading to find out how you can use a trust for asset protection.
What Is a Trust?
A trust is an estate planning tool that lets you transfer assets to another person. When you place the assets in the trust, you also designate a beneficiary — or multiple beneficiaries — as well as a trustee. The trustee is responsible for managing the trust and ensuring that the assets are properly distributed to the beneficiaries according to the terms of the trust. The person who creates the trust is called the trustor.
There are a few different types of trusts, but most people have either revocable or irrevocable trusts. An irrevocable trust is one that can’t be changed after it has been set up. It gets its name from the fact that the trustor can’t change their mind — or revoke the terms. A revocable trust is one that can be changed up until the trustor’s death. These trusts are often more popular because they allow for more flexibility.
You may also hear people use the terms living trust or testamentary trust. A living trust is one that is created while the trustor is still alive. A testamentary trust is one that is set up after the trustor’s death through instructions left in the will.
Using Trusts for Asset Protection
Many people believe that the best way to leave their assets to their children, grandchildren, or other beneficiaries is to outline their wishes in a will. However, wills can be more cumbersome, are harder to change, and can take a long time to go through probate. Using a trust as part of your overall estate plan can give you more flexibility and freedom in ensuring that your assets are distributed as you wish.
Benefits of Using Trusts
There are many benefits to using trusts for asset protection as part of your estate plan, and we’ve outlined some of the most important ones below. If you’re not sure whether a trust is the right option for you or you have questions about how a trust can help you protect your assets, talking with an estate planning attorney at Davidov Law Group is a good first step.
One of the biggest advantages using a trust provides is that assets in a trust don’t have to go through probate. Assets that are set to be dispersed through a will can be held up for months — or even years if the will is contested — which can create problems if those assets are needed quickly to pay for a funeral or other expenses. Bypassing probate also means there are no worries about anyone trying to challenge how you’ve distributed your assets.
Ability to Change Beneficiaries
While it is possible to change how your assets are distributed in a will, it requires creating an entirely new will every time. If you work with an estate planning attorney to set up the right kind of trust, you can have more flexibility in changing the beneficiary without having to change your entire estate plan or draft new documents. Changing the beneficiary — whether you are leaving the assets to someone completely different or are adding beneficiaries — is a simple and easy process.
More Control Over How Your Assets Are Distributed
If you die without an estate plan, your assets automatically pass to a relative, such as a spouse or an adult child, depending on what living family members you have. If you have no family, the estate reverts back to the state of New York. For those who want to ensure that their assets go to a specific place — such as a charity — or person, a trust allows them to make those decisions early on and set everything up so that there’s no confusion later on.
Many people choose to use trusts as a way to protect their assets from estate or gift taxes. When done properly, a trust can make a significant difference in how taxes are handled on your estate and assets, which can preserve more of your wealth and assets for your children and other beneficiaries. However, it’s important to recognize that tax laws are complex. If you are planning on using a trust because of the lower tax implications, you need to work with an experienced estate planning attorney who understands which type of trust is your best option and can help you set things up correctly.
Ensure Your Estate Plan Meets Your Needs
While it may be tempting to try to create an estate plan on your own, it’s important to talk about your wishes and the best way to ensure they are carried out with an estate planning attorney. These lawyers have extensive experience helping clients understand their options, and they know what questions to ask and what potential challenges may come up to plan for.
At Davidov Law Group, we understand how important it is for you to know what’s going to happen to your assets after your death. We can help you create an estate plan that works for your situation and let you know if a trust may be applicable and beneficial for you. Call our New York office at 516-928-6594 to speak to a member of our team to schedule a consultation to discuss your options.