Trusts are one of many devices used in estate planning. While you are planning your estate, you might write a will, determine your advance medical directive, and name beneficiaries to each of your accounts. A trust is an arrangement with a third party, known as a trustee, to hold assets on behalf of one or more beneficiaries. This is done to ensure that the assets are available to the beneficiaries later.
Speak with an estate planning lawyer about setting up a trust. Typically, trusts are set up with a bank, an attorney, or a financial adviser.
A Trust Can Keep your Assets from Going through Probate
Avoiding probate is one of the main reasons why many individuals choose to place assets in trusts. Probate is the legal process of determining an individual’s beneficiaries and distributing his or her assets to them according to his or her will or, in the absence of a will, according to the state’s intestacy laws. Probate can be expensive, costing 5-7% of the total value of the estate. It can also be complicated and frustrating for the deceased’s family members. A trust allows assets to be transferred directly to a beneficiary, avoiding probate and all the costs that come with it.
A Trust Can Potentially Protect your Assets from being Seized in Bankruptcy
The type of trust you open determines whether the assets contained within may be seized by creditors in the event you file for Chapter 7 bankruptcy. If you store your assets in a revocable living trust, your assets may be seized. Why? Because with a revocable living trust, you are considered to the assets’ owner for the rest of your life.
If the assets are in an irrevocable trust, though, they cannot be seized in a bankruptcy. This is because once the trust is opened, the assets are no longer considered to be the property of the individual who opened it. Therefore, if the assets are not yours, they cannot be taken from you.
A Trust Can Shelter your Assets from Certain Taxes
A bypass trust, also known as a family trust, can be used bypass your surviving spouse’s estate and its associated estate tax. This type of trust can also be used to allow money within to grow, tax-free, to provide for your beneficiaries in the future without burdening them with high taxes on the money.
Work with an Experienced La Crosse Estate Planning Lawyer
Before you decide to open a trust or take other steps in planning your estate, speak with one of our experienced estate planning lawyers. They will discuss the laws that govern estate planning in your state and help you make decisions that will deliver the greatest benefit to your loved ones in the future.