What is The Main Purpose of a Trust
A trust is an estate planning document that is a legal arrangement to ensure a person’s assets eventually go to specific beneficiaries. There are many different types of trusts that you can create with a Living Trust also known as Revocable Trust is the most common and popular. The main purpose of your trust will depend on your unique goals and needs. Leading Phoenix estate planning attorney, Nicole Pavlik, says “Make things easier for the people you love,” meaning one of the benefits of a trust is to make the settlement of your estate easier for your loved ones after you pass.
- Avoid The Hassle of Probate
One of the main reasons that many individuals create a trust is to avoid probate. Why? Because probate can be slow, expensive, and beneficiaries need to wait for promised assets to be given to them. Probate is the court process of validating a will and distributing the estate’s assets. It can take several months or even years to complete as the court oversees the valuation of assets, the determination of what creditors and debts need to be paid first, and then the distribution of remaining assets to verified and legitimate beneficiaries. Additionally, the probate makes the will public information so anyone can see what you had and who gets what.
In contrast, trust assets pass outside of probate. The administrator of the trust, called the trustee, can immediately distribute the assets in the trust to the beneficiaries without involving the court. Trusts can hold all kinds of different assets such as investment accounts, houses and other real estate, and cars. Trusts do not become part of the public record so your privacy is preserved. A trust is an effective way to give property and other assets to your children and loved ones while they can avoid the hassle of probate, especially when they are mourning.
- Asset Protection
Certain trusts are set up to protect assets such as irrevocable trusts which offers your assets the most protection from creditors and lawsuits. Asset protection is especially important for professionals, such as physicians, dentists, lawyers, and contractors, that face a constant threat of lawsuits from patients, clients, and government agencies. It is recommended to learn the pros and cons of the irrevocable trust with a reputable and knowledgeable estate planning lawyer.
- Plan for Incapacitation
Another benefit of using a trust is to plan for incapacity. With a living trust, if you become incapacitated through injury or medical emergency for example, the person you named as successor trustee can immediately step in and take over managing the trust assets for you.
- Lower Tax Liability
Some types of trusts can reduce the estate and inheritance tax your estate will owe. Decide whether your estate is large enough that you will need to pay such taxes and if so, then a trust may be needed to avoid or limit your tax liability.
- Protect Beneficiaries with a Special Needs Trust
A special-needs trust is to protect your disabled child or another family member with special needs. This type of trust allows you to provide for a loved one with special needs without reducing their eligibility to receive government benefits, such as social security disability income (SSDI) or Medicaid. Furthermore, you can use the trust to ensure the assets go to expenses you stipulate.
- Give to Charity
You can even set up a charitable trust is to donate to a beloved cause. Charitable trusts provide donor tax breaks. Again, if you are thinking of wanting to leave some of your assets to a good cause, talk it over with your estate planning attorney.
Your Phoenix Estate Planning Attorney
Nicole Pavlik is a top estate planning attorney who can help you create a comprehensive estate plan and set up your trust. She is a trusted advisor for Arizona individuals, couples, families, the LGBTQ+ community and small business owners. She offers virtual estate planning – You only need to come to the Phoenix office to sign documents. Call the Nicole Pavlik Law Firm today at (602) 635-6176 for a free consultation.