Do you have an heirloom that you want to pass on to your children or grandchildren? However you mention them in your opinion, the court will review it. Having a family trust avoids this legal process and is one less thing to worry about for your children.
Without a family trust, your children must pay their inheritance for attorney’s fees and other administrative costs. Elvis Presley’s Estate is worth more than $10 billion, but the heirs lost more than 70% of his estate due to Probate!
What is a family trust?
A family trust is a legal agreement in which a person transfers their property to another person who holds and manages the assets of the beneficiaries named after their death. The legal term for this arrangement is called a trust deed. A person who transfers his property is called a transferee. The third person described is the trustee and the designated beneficiary is called the beneficiary.
For example, parents want to transfer ownership of their home to their children in the event of their sudden death. They create a trust agreement that puts the grandparents in charge of the property until the children grow up.
In this case, the parents are the hosts, the grandparents are the caretakers, and the children are the beneficiaries. Technically, a trustee does not have to be a relative but can be another person, such as a business or legal entity.
Family trust model
Before getting into the definition of a family trust, one must first understand the different types of family trusts. Creating a family trust is easier if you know what’s involved.
-Trust in marriage
-Trust for special needs
-Asset Protection Trust
-Inter vivos revocable trusts
The debt of the Credit Shelter Trust Company
Different family trusts have different purposes. Some allow you to avoid estate taxes (or reduce estate taxes), while others open up your estate planning options. Most of them will require a qualified financial advisor to help you, but you can set it up yourself. What is a Certificate?
Probate is a legal process that confirms the final will of a deceased person. The facilitator will oversee the building and ensure that the parties involved meet the objectives of the will.
For example, the executor must liquidate the shares and pay any debts owed to creditors, administrative fees, taxes, etc. Finally, the executor will distribute the remaining assets to the heirs or benefactors.
Why You Should Have a Family Trust: The Benefits of a Family Trust
A family trust can protect assets from creditors, claims and other administrative costs. Therefore, if the host has credit card debt, the assets of the trust are not protected from creditors.
Avoid inheritance tax
Trusts provide tax advantages that prevent the IRS from taxing the assets held in the trust. According to the Internal Revenue Service (IRS), the federal estate tax is a tax on any property transferred after your death. These assets include assets, such as cash, real estate, insurance, annuities, and business interests. Keep confidential
When going through the probate process, the information becomes public and available to everyone!
Eligible for Medicaid
Placing assets in a family trust reduces his book value, making him eligible for Medicaid. According to the Commonwealth, a person must be involved in the trust for five years before applying for Medicaid. A living trust or testamentary trust? A living trust is an agreement created while the settlor is still alive. This type of trust allows the settlor to transfer the will after death while still managing the assets.
On the other hand, a testamentary trust is a function of his assets that were established by his last will (and testament) after his death. However, a testamentary trust does not avoid probate as the court process must approve it. The main reason people choose between an inter vivos trust and a testamentary trust is cost. Establishing an inter vivos trust comes with high initial expenses. For example, my husband and I hired an estate planning attorney to set up a family trust. Our attorney often sends us material for our review. He paid us for any work he had to do, like answering emails or fixing typos.
However, heirs may lose more money in the end from a testamentary trust due to probate; therefore, the cost to establish a family trust can be very small compared to the savings!
Revocable Trust vs. Unbelievable confidence
A revocable family trust is where the settlor can change the terms of the trust or revoke it entirely. A withdrawn trust returns the entire bank to the owner. However, after the host dies, the trust becomes irrevocable.
In contrast, an irrevocable family trust is a trust that the settlor cannot change or revoke. The grantor cannot dispose of assets held in trust. The advantage of this type of trust is that it avoids inheritance tax; instead, he will pay gift tax, which is slightly lower than inheritance tax!
Our family trust is something that can be taken away. When our kids misbehave, my husband and I joke that we take them out of trust.
Who should have a family trust? Anyone whose financial goal is to build and pass down a family home should have a family trust as part of their estate plan.
The main advantage of a family trust is to avoid probate and all the associated costs. My husband and I started planning our house right after we had our first child.
However, people should not underestimate how much money they have. Owning a property that helps improve people’s lives is something that should always be protected!
Either way, if your assets are small amounts in a 401k or a car, having a family trust is important to maximize the value of your assets that you will pass on to your heirs.
The beneficiary can be any family member, even if you have no children. For example, you may have a niece or nephew who you can help support your old friend!
How to set up a family trust
Here are some important things to remember if you want to set up a family trust and implement an effective estate plan. Remember that there are many ways to use a family trust and you need to take the time to plan it properly. Call an estate planning attorney
Online home design tools may be available. However, I recommend making an appointment with an estate planning attorney. Allow them to worry about all the legal issues, such as mortgages that can be rescinded. You want to make sure all your bases are covered. It is better to rely on a professional.
Talk to your partners or colleagues to get referrals. A financial advisor will recommend a lawyer who will help you protect your assets, this is how we found our lawyer.
Decide on your trustees and beneficiaries
Although an estate planning attorney is responsible for preparing all legal documents, especially the trust agreement, there are a few things you should know:
Who will you appoint as your guardian to hold and manage your assets? But, who will you choose as the beneficiaries of the investment?
Is there a special situation you would like to add? For example, the beneficiaries of our family trust are our children. Therefore, we appointed one of the grandparents to be the caretaker to take care of the house when my husband and I died. Additionally, we have a guardian (ie the grandfather) who is responsible for managing the home until the children become legal adults.
Make the family trust the beneficiary
Once you’ve created your trust, the next step is to update your property and name the trust as a beneficiary. For example, a retirement account needs a beneficiary. Many people name their surviving spouse or children as beneficiaries. In this case, the beneficiary must be the name of the trust.
Some of the assets we allocate to family trusts as beneficiaries are 401k, life insurance policies, annuities, mutual funds, and investment properties. Final Thoughts
A family trust is a great way to protect your assets after you die. Family trusts also help beneficiaries avoid loan debt and keep the host’s net private!
A trust deed gives another person the right to manage the assets of the estate. No matter what kind of resources you have, if you can help someone after you die, I encourage you to do it! Seek advice from an experienced attorney to learn the basics of estate planning and help you protect your assets.