Creating a trust to distribute your assets has many benefits, mainly the flexibility to control how your assets will be used after your death. Trusts can be very different in size, goals and benefits. Trusts can go into effect after your death, or in a living trust, your assets are transferred during your lifetime. Different types of trusts have different requirements, and will have different benefits of creating a trust.
1. To Avoid Probate: Probate court is the public’s notification of your estate assets and will. Probate of your estate can cost from 3% to 8% of your estate worth, depending on the value of your estate. Federal and state estate and income taxes are also paid by the estate assets. To avoid the costs and time of having your estate settled under probate court, your assets can be held in a trust or some other non-probate asset.
2. Reduce Estate and Gift Taxes: You can minimize your estate taxes by transferring some of your wealth to a charity through a trust. A gift in trust to a beneficiary avoids taxes on gifts that exceed the annual gift tax exclusion amount of $13,000 in one year. The federal tax code says gift taxes apply only to individuals, not to trusts. There is a lifetime exclusion amount of $11.4 million per individual million on gift taxes and estate taxes combined in 2019.
3. If You Become Incapacitated: If you become incapacitated, a trust has a built-in feature that a successor trustee who you chose who can take your place and can use your money for your care or their benefit, as designated in the trust.
4. Decide How You Want Your Assets Used: A trust gives you control to specify how you want the assets distributed in your trust to be used by your beneficiaries. For example, you can leave money to a charity for a specific purpose, or designate who your assets will go to after your beneficiaries die.
5. Protect Your Assets from Lawsuits: Some professions are more subject to lawsuits, such as attorneys, doctors and other professional fields. When you put your assets into a trust, you can protect your assets from public scrutiny and potential lawsuits.
A trust is a good alternative to a will for many people, and there are different benefits of creating a trust or a will. You need to consider the same estate planning issues for both a trust and a will. An experienced trusts lawyer can examine your situation, the types of trusts that meet your goals, and explain how a trust can help to meet your goals for the future.
If you are planning your estate and have questions about setting up a trust, an experienced trusts lawyer can advise you throughout the process. To talk to a probate, trust and estates attorney in Chicago or Lombard about how to make and store your will, contact the Estate & Probate Legal Group at (630) 382-8063.