When most people hear the term trust, images of wealthy “trust fund babies” and elderly individuals with high net worths come to mind. However, trusts can be beneficial for anyone seeking to protect their family’s inheritances and avoid probate. Trusts allow you to control who receives your assets and how they are given, even after your death. They can also provide tax benefits that a standard will may not.
The primary advantage of a trust is that it allows you to customize your estate plan. While a will can only be modified after your death, a trust can be amended or changed at any time as you see fit. Additionally, a revocable trust can be modified during your lifetime, which is an important consideration for many clients.
Another advantage of trusts is that they can help you avoid probate, a process that can be lengthy and expensive. In addition, a will is typically public record after your death, which can raise privacy concerns for some families. In contrast, a trust is private and can be settled more quickly than a will.
A trust can be set up to hold and distribute any type of asset, including cash, real estate, life insurance policies, stocks and other investments. In addition, you can include a special provision in your trust that provides for the preservation of collectibles such as artwork, coins and stamps. Your trust can specify that these items are to be kept together and then donated to a museum or other charitable organization after your death.
Your trust can also be used to manage your business after your death. You can name your trustees and describe in your trust how the business should be run, what you will do with any profits and other details that you would like to see implemented. This can prevent disputes among family members after your death and help keep the business running as smoothly as possible.
Trusts can be used to reduce federal and Ohio estate taxes. For example, you can set up a qualified terminal interest property (QTIP) trust that is designed to reduce estate taxes by shifting assets from the deceased spouse to the surviving spouse. In addition, you can save on probate costs by transferring assets that are titled as payable on death or transfer on death (POD or TOD).
While there are advantages to establishing a trust, there are disadvantages to putting an asset in a trust and you should seek legal advice before making any decisions. Your estate planning attorney can explain your options and help you choose the right trust to meet your needs.
