Estate and Trusts

There’s really no time like the present when it comes to planning your estate. Ignoring or postponing estate planning can create several serious problems down the road for you and your loved ones. For example, your personal possessions and other assets could end up in the hands of individuals that you no longer want to have them. The following could also occur:

• Your estate could be reduced by taxes;
• Your minor children’s future could be decided by a court;
• A court may have to make life or death medical decisions on your behalf;
• You may have no say over the management of your assets if you were to become incapacitated.

You can avoid these scenarios by crafting a will and taking other estate planning steps. Here is what you need to do.

Start With a Will

A will is the foundation of smart estate planning. You use your will to specify who will receive your assets and when they are to receive them.

Perhaps one of the most important functions of a will is that it allows you to name a guardian for your minor children. The peace of mind that comes from knowing your minor children will be taken care of by someone you trust is invaluable.

You should review your will periodically to ensure that it still reflects your wishes. You may decide to update your will if there are changes in your life, such as births, deaths, marriages, or divorces in your family.

Next, Focus on Other Important Legal Documents

A durable power of attorney for health care, also known as a health care proxy, allows you to name someone else to make medical decisions for you under certain circumstances. Once it is in place, hospitals, doctors, and other health care providers are obligated to follow your agent’s decisions as if they were your own. Another key estate planning document is a living will. This document generally addresses the type of medical care you want (or don’t want) as it relates to life sustaining treatments.

Update Beneficiary Designations

There are certain rules that govern the distribution of assets not controlled by a will. The proceeds of life insurance policies and retirement plan accounts are examples of non-probate assets. Your retirement plan benefits and life insurance proceeds will generally pass on your death to the person(s) you’ve designated as beneficiary on your account.

As is the case with your will, you should review your beneficiary designations regularly and update them when necessary to reflect any changes that have occurred in your life. You want to ensure that your assets will pass to your loved ones exactly as you want.

Utilize Trusts

Trusts are at the heart of effective estate planning since they are exceptionally flexible tools that can accomplish numerous objectives. Trusts can provide asset management and protection as well as ensure the future financial security of surviving family members. They can help avoid probate, unify an estate plan, and help reduce estate taxes. They can meet your charitable giving goals and also be structured to support a child or relative with special needs.

Factor In Out-of-State Moves

Income tax and estate tax laws differ from state to state. If you intend to pull up roots and make your home in a new state, investigate your future home’s rules regarding taxes. If there are differences, you may need to revise your estate plan.

Seek Professional Assistance

An estate plan can incorporate numerous, sometimes complex elements. You want to be sure that all the moving parts are working in harmony with your goals. A financial professional can work with your legal counsel to make the estate planning process considerably easier for you.

Trusts are remarkably flexible and helpful planning tools. They can be used to protect and transfer assets to loved ones and to accomplish other goals, such as long-term asset management. Here’s a look at some of the reasons why you might consider creating a trust.

Manage Assets

If you have acquired significant assets, you understand that managing them requires time, effort, knowledge, and patience. You may feel that your time is better spent doing something other than managing your assets, or you may not be completely confident that you have the skill set to do so. There’s the additional concern of how you could manage your assets effectively if you were to fall ill or suffer an injury. A trust can help to alleviate these concerns by ensuring that your assets will be managed by a responsible trustee in such a way that will preserve them for you and your loved ones.

Protect Your Assets

We live in a litigious society and lawsuits are more common now than in the past. One of the most effective ways to protect your assets for the next generation is to place assets in a trust for your child instead of giving them to your child outright as a gift or bequest.

Facilitate Charitable Gifts

With a charitable remainder trust, you can gift assets to the charity of your choice without giving up the income from those assets during your life. A charitable lead trust pays income to a charity of your choice and then returns the trust’s remaining assets to an individual beneficiary when the trust ends. Both types of trusts offer tax advantages.

Protect the Interests of a Minor

A trust can be used to manage assets for the benefit of a child or grandchildren. A trust can be particularly helpful if you have concerns about the maturity or the spending habits of a beneficiary in that you can structure the trust to stagger distributions to the beneficiary throughout adulthood.

Provide for a Loved One With Special Needs

You can help ensure that a special needs child or adult relative will benefit after your death by creating a trust designed specifically to provide sufficient funds to take care of that individual. You can choose who you want to serve as trustee of this trust, and change the trustee if necessary, which can provide a degree of assurance that your wishes for the special needs person will be closely followed.

Trusts Are Flexible

Trusts offer individuals and families a high degree of flexibility. A trust established during your lifetime is called a living trust. One that is created in a will is called a testamentary trust.

Living trusts can be revocable or irrevocable. A revocable living trust generally names you or you and your spouse as trustee(s) and beneficiaries. As the creator of the trust, also known as the “grantor,” you can change the trust’s terms, add or withdraw funds, and end the trust if you wish. With a revocable living trust, you always retain control over the assets.

An irrevocable trust is intended to benefit someone other than the trust’s creator. In the trust agreement, you, as creator, specify who the trust will benefit, the manner of its operation, and the name of the person(s) (or institution) who will manage the trust. In general, you cannot change the terms of an irrevocable trust once it has been created.

Your financial professional can explain in greater detail the many ways you can use a trust to further your financial and estate planning goals.

For more information on Trusts, call Vista Tax Relief at 480-916-2862 today!