Answers to 4 Frequently Asked Questions About Trusts
By Solid Serenity Legal Solutions
Estate planning can be confusing. There are so many terms: Wills, Trusts, Durable Powers of Attorney, Advance Directive for Health Care. When you don’t have experienced and knowledgeable guides, the process can really bog you down.
Today, we want to give you answers to 4 frequently asked questions about trusts.
(1) Why do I need to establish a trust?
A Will is a great tool to distribute assets to your heirs. But a trust is a more effective tool for asset management.
Trusts enable the creators to establish ways to control the assets inside the Trusts. Trusts are managed by an identified Trustee chosen by the creator. A Trustee has the power to make decisions and properly manage assets in ways that best serve the beneficiaries’ interests based on directions spelled out by the creator in the trust.
Also, the Trust owns the assets as soon as the assets are titled into the Trust. So, any assets owned by a Trust avoid probate. The Trust appoints Successor Trustees who can manage and distribute assets after the death of the creator, so there is no need to go to Court to transfer the property to the heirs.
If you have questions, contact us.
(2) Are there different kinds of trusts?
There are two types of trusts: revocable and irrevocable. The proper Trust for your depends entirely on your family’s goals and situation.
Revocable trusts allow the creator to change the trust at any time. You can change the beneficiaries, move assets in and out of the trust, and make changes to your distributions as often as you like. The revocable trust is an extension of the creator.
Irrevocable trusts, on the other hand, are much more difficult to change. Once they are established, the creator has little to no power to change, adjust, add, or remove beneficiaries nor change the way assets will be managed.
Unlike the revocable trust, the irrevocable trust is not considered an extension of the creator. The trust is considered a separate entity. This status allows the irrevocable trust to be a good option for protection from liabilities and creditors, but it has the downfall of taxation at the higher trust rates.
(3) Can I fund a Trust using my life insurance?
Yes. The advantage of funding the trust with life insurance is that upon death, the insurance benefits and funds go to the trust. Instead of going to one beneficiary, the funds are distributed to the trust and the trustee can manage them to serve the beneficiary.
This structure may be beneficial to families where minors, loved ones with substance abuse or creditors issues, or loved ones with Special Needs will inherit from the creator. Placing life insurance proceeds into a Trust allows the creator to place restrictions on the funds, instead of handing the money to the heirs outright.
(4) How do I fund a Trust with life insurance?
You may either name the Trust as a beneficiary of the policy, or transfer the ownership rights of the policy to the Trust. There are advantages and disadvantages to each type of funding that you should review with an experienced professional for your situation. Book an appointment with us today to make the right plan for your family.