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When planning for your estate, you should consider creating a Trust to hold your assets. Trusts are financial arrangements in which a person, the grantor, designates a trustee to manage and distribute the assets or property to beneficiaries. People incorporate Trusts into their estate plan for different reasons, such as avoiding probate, maintaining privacy during the estate administration process, tax savings, or to create an efficient structured way to distribute wealth to your beneficiaries. There are different types of trusts with varying benefits and capabilities, so you must work with an experienced estates & trusts attorney to accomplish your specific goals.
Here are 5 of the top benefits of a Trust to consider when creating your estate plan:
- Avoid Probate. Probate is a public process involving the court-supervised authentication of a Last Will and Testament, and the reporting of probate assets, expenses, and distribution of your assets to beneficiaries. While many of these steps are still necessary when using a trust, the use of a trust keeps these actions private and may allow for the process to occur much faster.If you own property in more than one state, a trust can be extremely helpful as you can avoid the probate process in multiple states.
- Tax Benefits. During the transfer of property, your beneficiaries may encounter high estate taxes that will reduce the overall value of the assets. Within certain trusts, assets and properties are not subject to estate taxes because they are recognized as gifts to the beneficiaries. In these cases, you use available tax exclusions and exemptions during life to avoid estate taxes at death.In Maryland, the estate tax threshold is currently $5 million, which means that if the value of your estate is less than that, it will not be taxed by the state. These tax thresholds vary from state to state. The federal estate tax exemption is currently $11,700,000; however, proposed legislation may significantly lower this exemption.Keep in mind, though, these tax benefits can only be accessed in Irrevocable Trusts, which refers to trusts which cannot be amended after their creation. While the assets within Revocable Trusts are subject to estate taxes, they do offer benefits for those who are looking for more flexibility, control, and privacy.
- Control of Your Assets. Revocable Trusts can be modified during the lifetime of the grantor. Revocable Trusts are useful for those who want to maintain control over the distribution of their assets.Revocable Trusts, grantors are able to add or remove beneficiaries at any time, as well as assets or property, and change the designated trustee. Grantors can also terminate the conditions of the trust at any point during their life should the need arise. Typically, the grantor is the trustee of his or her own trust during his or her life.
- Clarity for Beneficiaries. Trusts are a useful tool in eliminating possible conflicts regarding your estate. No one wants to imagine their loved ones fighting over who receives what after they pass on. This can be especially important for blended families. Using both Revocable Trusts and Irrevocable Trusts, the fate of any assets and properties can be determined by the grantor in a way that limits the ability for changes to occur if the grantor were to become incompetent or after death.Perhaps, more importantly, the use of certain trusts can provide creditor protection to beneficiaries and allow for others to manage assets for family members who may not be able to manage their own assets.
- Charitable Giving. If you decide that you would like certain assets to go to charitable organizations, grants, or scholarships, Charitable Trusts can make the process effective and efficient. Through Charitable Trusts, you can determine where you would like to direct your wealth, either while you are still the trustee of the Trust, or after that responsibility passes on to your successor.Certain Charitable Trusts can also offer unique tax benefits and financial benefits for you and provides a potential income stream to your beneficiaries. These benefits are determined by the term of the Charitable Trust as well as the number of projected payments and IRS interest rates.
Deciding on which type of trust is right for you can be difficult. Understanding all the differences between Revocable and Irrevocable Trusts and Charitable Trusts requires you to have a conversation with an estate planning attorney.
Our team can help you determine the appropriate Trusts for your specific needs and can assist in administering the Trusts for your beneficiaries.
At Sessa & Dorsey, we consider the bigger picture at hand and advise our clients on the best trusts for their specific needs and desires. If you have questions about estates and trusts, please contact us at (443) 589-5600.
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