5 Essential Reasons You Should Set Up a Trust Today
As you get older, it's important to have plans in place regarding the administration of your property and estates.
It's not just about having your lawyer draw up a will. Certain arrangements, such as a power of attorney and a trust are great ways to give you more flexibility and control over your assets. In this article, we’ll share five detailed five reasons why you simply cannot dispense with setting up a trust.
Reduce or eliminate estate tax
The government of Pennsylvania and the Federal government both have clear-cut tax regulations, which may take effect long after you've passed on. If such a thing happens, your heirs will have their inheritances greatly reduced.
Drafting, setting up and maintaining trusts can be expensive and complex, but they are also some of the best estate planning tools available to mitigate tax issues in advance. Currently, the Tax Cuts and Jobs Act (“TCJA”) increased the exclusion amount for federal estate tax from approximately 5 million to 11 million dollars. The TCJA expires in 2025; therefore, unless Congress decides to extend the estate tax exclusion, many people will face a dramatic increase in their estate tax liability exposure. If your estate is not subject to estate taxes now, it may be in a few years. As such, proactive estate planning can allow you to incur fewer estate tax dollars, or even have them eliminated altogether.
Trusts offer fixed parameters for the use of your assets
You can choose to create a standalone trust agreement while you're alive, or establish one under your will. Whichever option you go for gives you the chance to tailor the trust agreement to your preferences.
You can include parameters linked to age attainment or limit the amount of money certain beneficiaries can receive annually based on other requirements. For instance, you can have it such that a beneficiary receives a certain amount of money after they turn 18.
They're valuable during disabilities or illnesses, not only death
The terms of your will only take effect after you've passed on. However, a trust set up during your lifetime can benefit your family in times of illnesses that can affect your ability to personally manage your assets.
In such cases, the trustee can make decisions on your behalf regarding paying of bills, filing of tax returns, and asset distribution.
Trusts help avoid the probate process
Assets under your will have to be verified via probate before any asset distribution gets underway. As such, a will eventually becomes a part of the public record. On the other hand, a trust agreement remains private.
In this instance, you'll have to negotiate with just your attorney and the trustee, all in privacy. This is essential if you don't want your family matters in the eyes of the public, and also helps you to circumvent the lengthy probate procedure.
Trusts can help to protect assets
Disabled individuals on Medicaid or Supplemental Security Income have stringent income and asset limitations — if they own or receive too much money they can lose these government benefits. Trusts, if drafted correctly, can protect and shelter these assets and income, so these limits are not exceeded.
Trusts can also be used to protect assets from creditors, if set up in advance and drafted correctly. An asset protection trust (APT) is an example of a trust that shields a grantor’s assets from future creditor claims.
Need help setting up a trust in Bethlehem and the entire Lehigh Valley? Reach out to the estate planning attorneys at Leeson & Leeson. Leverage our over 50 years of legal service to create a trust that safeguards your assets and provides for your loved ones in the future.