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Goldberg Law Center, P.C.

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What is the Purpose of a Trust?
What are the Clear Advantages?

Trusts offer many benefits. Most families that create trusts want to avoid probate, increase privacy, save taxes and protect assets. Trusts provide a way to do that. They also provide a superior method of controlling when and how beneficiaries receive an inheritance.

In a nutshell, a trust provided more control over assets and allow you to keep control of the assets longer, while protecting the assets from taxes, lawsuits, creditors, predators, divorce and bad spending habits.

What Types of Trust Should I Consider When Setting Up An Estate Plan?

Think of a trust as the “Swiss army knife” of estate planning. There are dozens of types of trusts that can be created and used depending on what goals you are trying to accomplish. We generally think of trusts by asking four questions:

  • When do you want it to be effective?
    • During your lifetime or only after you die?
  • Can the creator of the trust change it?
    • If you want to be able to change it, the trust is revocable. If not, the trust is irrevocable.
  • Why is the trust being created?
    • You can use a trust to do several things; avoid probate, protect assets from creditors, lawsuits and divorces, or save taxes through gifts or discounts. You can take care of a person with special needs and preserve government benefits; you can remove life insurance benefits from a taxable estate and you can make charitable gifts. And much more.
  • Who is paying the income tax on the assets inside of the trust?
    • The person who created it;
    • The trust itself;
    • The beneficiaries of the trust.

Most folks start with a revocable living trust as the foundation of their estate plan. The revocable living trust is very flexible planning tool that can accept things like life insurance, real estate, investments, personal property, or annuities.

We use life insurance trusts to control and protect the death benefits from estate taxes. Life insurance, as a general rule, is income tax free to the beneficiary. However, we want to make sure your heirs don’t pay estate taxes on the death benefit when you die. We also want to make sure that those life insurance benefits are protected from creditors, lawsuits and taxes for the surviving spouse and any younger beneficiaries.

Many families with “special needs” members use a special needs trust to make sure that any government benefits the child is receiving are preserved and protected, and that an inheritance doesn’t disqualify them from those benefits.

Retirement planning trusts ensure that IRAs and other retirement assets are controlled and protected long term.

Medicaid planning trusts are used with folks who are trying to qualify for Medicaid but are over the asset limits but may end up in a nursing home.

Many of our clients are business owners. For them, we use asset protection trusts to make sure that the assets they work for their whole lives aren’t lost in one lawsuit or by one mistake.

Charitable giving trusts are wonderful tools to help families who want to make large charitable gifts either during their lifetime or upon their death.

We can also use trusts to protect and control firearms, family pets and heirlooms. There truly is a “trust for any reason.”

For more information on Purpose & Advantages of a Trust, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (719) 444-0300 today.