A Trust is a fiduciary relationship between parties, and it allows a Trustee to hold assets on behalf of a beneficiary of those assets. Specifically, a Trust can be created to direct how your assets are utilized and how they pass to the beneficiary. Normally, Trusts are created to reduce an estate tax liability or to protect property in an estate to avoid probate and to direct the use of your assets.
What are the benefits and disadvantages associated with a trust in estate planning?
The most common Trust is a living Trust. Assets placed in a living Trust are for the benefit of a person during their lifetime, and then those assets are transferred to the Trustee’s designated beneficiaries at the time of your death. The largest benefit of having a living Trust is avoiding probate. A Will must be probated, and a Trust is an entity that survives the maker’s death so it doesn’t have to be probated. A living Trust can be more cost effective than the cost of probating a Will. The living Trust can be named as a beneficiary for things such as life insurance policies, 401(k)s, IRA assets, etc.
A Will is made public when it’s probated, but a Trust is not made public. The Trustee can take over Trust responsibilities immediately upon the death of the maker; however, in a Will, there are procedures that must be followed for the executor to take control of the assets. The assets must pass from the deceased’s name to the executor’s control. The living Trust is most popular because it is the most cost effective.
The only major disadvantage to a Trust is that a living Trust is limited in what application it can serve. In a Trust, you can’t arrange for the care of minor children, announce guardians for minor children, grant rights to an unmarried partner, or make funeral arrangements. These things are all handled by the Will.
Why would you recommend a trust as an effective method of estate planning?
When we recommend a Trust, it is often because it avoids probate and because it is private. Also, if you have minor children, or a child with disability, you can set aside the assets that can benefit the child in your Trust, giving you the ability to decide how that money is allocated.
If you have family members that are going to be the beneficiary of your Trust, and that family member is not adept at handling money, you can make provisions in your Trust to control how much money they will receive, how they will receive it, and what the money is for.
Trusts are also used for out of state real estate properties. If you own a property out of state, that property will have to go through probate. If that property is held by a Trust, because it doesn’t go to probate, it passes by the direction of the Trust and it doesn’t have to go through probate. For Trust purposes, it’s much easier for a Trustee to handle the finances of a Trust than it is for an executor of the estate from the Will to take control immediately upon the death of the maker. If you have complicated assets, or the distribution of your assets is very complicated, it’s much better to have outlined that in a Trust than to try and have it outlined in a Will after death.
By forming the Trust before your death, you can set up exactly how you want those procedures to be done.
For more information on Trusts In South Carolina, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (864) 982-5930 today.