When the topic of estate planning comes up, one of the first questions you may be faced with is whether or not to include a Trust agreement in your plan. If you have never made use of a trust agreement before you likely have a number of important questions. For starters, why should you should put assets into a trust rather than gift them in a Will? There are actually several reasons why gifting assets through a trust often makes more sense.
Why Put Assets into a Trust?
Although your reasons for using a trust in lieu of your Will to pass down assets will be as unique and individual as you are, some of the most common reasons include:
Probate avoidance –
Probate is the legal process that follows the death of an individual. The purpose of probate is to ensure that all of the decedent’s assets are identified, located, valued, and eventually passed down to the intended beneficiaries or legal heirs. Probate can take months, even years, to complete. Not to mention, it can cost the estate a significant amount of money. Assets in a trust, however, do not have to go through the probate process. This makes them available to beneficiaries much sooner and saves the estate money.
When you gift assets using your Will you lose all control over the asset after it is transferred to the beneficiary. With a trust, however, you can effectively retain a certain degree of control over the asset after it has changed hands and even after your own death. The trust terms can be used to decide things such as when the beneficiary can receive distributions from the trust and how much those distributions will be. This could include the use of staggered distributions as the beneficiary ages. You can even use trust terms to decide how the trust assets can be used. For example, you might limit the assets to being used only for educational purposes.
Tax benefits –
The right type of trust can help shelter estate assets from federal gift and estate taxes. Furthermore, appreciable assets, when transferred into a properly drafted trust, can grow in value without incurring additional tax liabilities.
Asset protection –
Assets held by the right type of trust are also protected from creditors of the estate and the beneficiaries. It can also protect from spendthrift beneficiaries themselves.
If you have additional questions or concerns about trust agreements and how including one in your estate plan might be beneficial, contact the experienced Texas estate planning attorneys at The Mendel Law Firm, L.P. by calling 281-759-3213 to schedule your appointment today.