You may have heard of a “trust” before, but you might still be wondering what it is and what it can do for you. Quite simply, a trust is a legal arrangement in which a person, called a trustee, controls property given by a second person, a trustor, for the benefit of a third person, the beneficiary. The primary advantage of a living trust is being able to control your assets while avoiding many of the taxes, fees, and legal action imposed upon your passing. “How?” You may ask. Well, let’s dig in…
WHAT CAN I PUT IN A TRUST?
First things first, you’re probably wondering what you can even put in a trust. Well, the answer is basically anything that has value, from real estate to intellectual property. You name it; if it has value, you can put it in a trust.
WHAT HAPPENS TO MY ASSETS AFTER PLACING THEM IN A TRUST?
Once placed in a trust, you transfer your ownership to the trust. You no longer legally own your assets; however, as the trustee, you still retain complete control. Therefore, what happens to your assets after placing them in a trust is entirely up to you; buy, sell, give them away, do whatever you want. If you put your assets in a revocable living trust, specifically, you also can amend or revoke it altogether.
WHAT HAPPENS TO MY ASSETS AFTER I PASS?
They will be distributed directly to the beneficiaries named in the trust, avoiding probate (the legal process of proving a will), legal fees, and most estate taxes.
WHAT ARE THE BENEFITS OF A TRUST?
One of the primary advantages of a trust is the ability to avoid probate and have your assets distributed directly to your beneficiaries. Rather than put your heirs through the extensive legal process in which 2-7% of your estate could be lost to legal fees, your assets are distributed without the delay or expense of court proceedings.
Make Asset Distribution Clear
By delegating the distribution of your assets upon your death, your beneficiaries don’t have to go through processes to determine the value of assets or distribution.
Delegate Your Own Disability Trustee
Rather than relying on the court to appoint a guardian or conservator, if you become mentally incapacitated for any reason, you can delegate a disability trustee of your choosing to handle your estate.
Shelter Your Estate From Taxes
There are many tax shelters available through different trust provisions and strategies, talk with your financial planner to learn how you can leverage a trust for specific tax shelters, both during your life and after your passing.
Dictate Terms to Your Beneficiaries
If you want to control the circumstances under which your assets are distributed, a trust is a great solution. For example, if you want to protect a minor, you can dictate at what age they receive the monies. Or, if you are leaving your assets to someone of legal age, but they may be unable to manage their finances, you can give the trustee power to distribute funds as they see fit after your passing.
Protect Your Privacy
In the case you don’t have a trust, and your estate goes to probate, then your estate proceedings - often including a list of assets and their value, among other things – are made public. A trust, on the other hand, is a private document.
Navigating trusts and how they can be beneficial for you is not always simple without a trusted advisor if you want to learn more about what a trust can do for you contact us today to speak with one of our certified financial planners.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Financial Specialists LLC nor any of its representatives may give legal or tax advice.
-Written by Eric E. Gurholt, CPA/PFS, CFP® | Financial Advisor
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