“So, what is a trust?”
A professionally-designed trust can help just about everyone. Physician’s Money Digest, in “6 Reasons You May Need a Trust,” reminds us to think of a trust as a holding spot where you put your assets before they are released to the people or organizations you eventually want to receive them. Anything you transfer to the trust becomes property of the trust. The trust then holds the property for your benefit, or for the benefit of those whom you choose.
The three separate parties to a trust are: (i) the grantor, who creates the trust; (ii) the beneficiaries, who receive income and/or principal from the trust; and (iii) the trustee, who manages the trust pursuant to the trust document. The trust document has the rules set by the grantor regarding how the trust is to be managed. These rules instruct the trustee on administration, such as how to invest and manage trust assets, any limitations on trust activities, when and how to distribute principal and income earned, and who receives the distributions.
There are many different kinds and uses for trusts. Here are a few of the reasons for considering one:
Protection from predators. If you want to leave property to a relative but need to make sure the beneficiary doesn’t lose it in a lawsuit, a properly drafted trust is untouchable by the legal system.
Protection for someone from themselves. Too many young adults’ lives are ruined by inheriting large sums of money while they are young and irresponsible. A trust can give the authority to a reliable trustee to determine when beneficiaries are ready for their money.
Disability planning. You can provide for a disabled relative without disqualifying him or her from Medicaid or other government assistance with the help of a “Special Needs Trust” (SNT). This lets you set aside funds for the care and benefit of a person with special needs and the trust isn’t considered an asset when he or she applies for government benefits.
Estate planning. The first $5.45 million of property per decedent is exempt from taxation. Multiple marriages are a good reason to use a trust in estate planning. If you and/or your spouse have children from previous marriages, you can use a trust to be certain that the remainder of the estate of the first to die goes to your own children by blood, while giving support to the surviving spouse during his or her lifetime or until remarriage.
Privacy and simplicity. No one will know who owns trust property except for you, your attorney, and the trustee. Trust property doesn’t pass through probate.
Asset protection. A trust can be a powerful tool to protect your assets from bankruptcy, lawsuits, and divorce. If your child doesn’t need all of the trust principle for living expenses, you might think about a provision to allow assets that won't be spent to remain "locked in" and secure from others.
Trust law is complicated, so you should consult an estate planning attorney who has experience in estate and trust planning. Call Rowley Law today to schedule an appointment, 847-490-5330.
Refference: Physician’s Money Digest “6 Reasons You May Need a Trust,”
Comments