Many of us have common objectives in estate planning. These include planning for potential disability, ensuring provision for our spouse and/or children or other loved ones, arranging for the distribution of our assets (and settling any debts) after our passing, minimizing federal and state estate taxes, and expenses of probate. One powerful tool in achieving these goals is a revocable living trust.
How Does a Trust Work?
A trust is a legal arrangement where one party, known as the grantor or settlor, transfers ownership of assets to another party, the trustee, to manage and administer for the benefit of one or more beneficiaries. The trust document sets forth the terms and conditions under which the trustee must manage the assets and distribute them to the beneficiaries.
Grantor
- The individual who creates the trust and transfers assets into it.
- Establishes the terms of the trust, including instructions for how the assets should be managed, and how and when they should be distributed.
Trustee
- The individual or entity appointed to administer the trust
- Entrusted with managing the assets held in the trust according to the instructions included in the trust and has legal authority over trust assets
- Has a fiduciary duty to act in the best interests of the beneficiaries and to follow the terms of the trust faithfully
Beneficiaries
- The individuals or entities designated to receive the benefits of the trust (e.g., distributions of income and/or principal from the trust)
- Can be named specifically in the trust document or can be identified by a class (e.g., children or charitable organizations)
Benefits of Implementing a Trust
Minimize or Eliminate Federal & State Estate Taxes
Properly drafted and funded trusts can help minimize or eliminate federal and state estate taxes, preserving more of your wealth for your loved ones. Incidentally, now is a great time to take advantage of the all-time high $13.61 million federal estate tax exemption that is set to decrease dramatically at the end of 2025. Click here to learn more about the estate tax exemption amounts.
Enhanced Asset Protection
Trusts can be structured to shield assets from beneficiaries’ creditors and legal claims, providing a layer of protection for them.
Avoid Probate
Properly funded trusts can bypass the probate process, allowing for efficient asset distribution without the delays and expenses associated with probate court.
More Flexibility & Control
Trusts can offer flexibility and control in tailoring distribution timing and conditions, allowing you to specify how and when beneficiaries receive their inheritance, based on your unique circumstances and concerns (i.e., disabled or minor beneficiaries, financial irresponsibility).
Increased Privacy
Unlike wills, trusts are generally not part of the public record, offering enhanced privacy for the details of your estate plans.
KH Can Assist You
From trust formation to asset funding and ongoing management, our estate planning attorneys can provide tailored solutions and personalized guidance every step of the way.Do not leave your legacy to chance! Contact KH today to schedule a consultation and explore how one or more trusts can enhance your estate plan.