Estate Planning
Trusts are important estate planning tools if you wish to:
Avoid probate since trusts are not part of an estate
Manage and distribute your estate to your loved ones privately
Reduce or eliminate taxes
Providing for the needs of underage or disabled beneficiaries
A trust is simply an arrangement where one party holds property on behalf of another party. In estate planning, a trust is created by the person doing the estate planning (the settlor), who authorizes another person (the trustee) to manage the assets for the benefit of a third party (the beneficiary).
Many people leave assets in a trust to support the children or grandchildren for education or medical expenses. Once the children reach certain ages or achievement levels (such as obtaining a college degree), they may receive money from the trust to do with as they please.
Many disabled people receive government benefits with very strict rules. With a special needs trust, you can provide funds for expenses beyond basic needs to enhance the quality of life. Your contributions complement the government benefits so that the disabled person isn’t disqualified from the government benefits.
Marital trusts are especially useful today for blended families. For example, a husband may want his current wife to use his property after he passes. By using a marital trust, after she passes, the property can go to his children from a previous marriage.
If you own real estate in multiple states or want to avoid the publicity of probate, consider a revocable living trust. Although completely separate from wills, revocable living trusts work hand in hand with wills to carry out estate wishes.
Irrevocable life insurance trusts (ILIT)
ILITs can move a person’s life insurance proceeds outside his or her estate to reduce or avoid estate taxes.
These trusts protect the assets from the beneficiary’s creditors or the beneficiary himself/herself. An independent trustee has complete discretion over the distribution of trust’s assets. Parents can use a spendthrift trust to prevent their beneficiary from losing an inheritance because of a debt or hostile divorce.
What if your beneficiary is underage, a poor money manager, gets a divorce, has creditors, is disabled, or will have to use most of the assets to pay taxes? You may name a trust as the beneficiary of an individual retirement account (IRA) instead of naming an individual.
Which Trust is Right for You?
As you can see, each type of trust can be customized to serve your specific wishes. Let John Holliman and Melanie B. Holliman help you define your financial goals and determine the best legal tools to preserve your wealth and leave your legacy.
Contact us or call us today at 205-663-0281 to schedule a consultation.
