You may be intimidated at the thought of putting together an estate plan, especially when considering the many legal terms involved such as “will,” “power of attorney,” or “trust.” However, you only need a basic understanding of how each of them could benefit your estate to navigate these concepts.
These legal tools are not just for the wealthy – benefits are available for a wide range of incomes. The following considerations can help you assess whether these tools could strengthen your estate plan.
What Are the Benefits of Using a Trust?
Benefits of a trust that do not apply to a will include:
- Probate avoidance. Probate is a court proceeding that can be lengthy and costly. But you can avoid it through the use of one or more trusts.
- Tax reduction. Trusts can help the testator – a person who has written a will – reduce estate and gift taxes on an estate.
- Control over disbursement. Trusts allow the testator more control over asset disbursement than a standard will provides. A trust can reduce the potential for a beneficiary to erode his or her inheritance as a result of poor financial decisions. For example, a spendthrift trust can provide financial support for the beneficiary, but prohibit the beneficiary from selling his or her interest in the trust funds. You can also make the disbursement of funds contingent on the beneficiary’s achieving certain goals, such as graduation. A trust can also help shield funds from creditors.
If assets need to be protected from creditors, an asset protection trust can help. However, such a trust must generally be irrevocable, which means that once created, the trust cannot be altered, changed, modified, or revoked.
Is Legal Counsel Necessary?
Certain online resources can help you create an estate plan, but they tend to be very general and aren’t tailored to your situation. A TuckerAllen estate planning attorney can discuss which options best meet your needs and goals.