Trusts have been steadily gaining in popularity over the past several years as an estate planning tool that can offer many advantages to certain individuals and their future heirs. Here are some of the ways a trust can be a worthwhile addition to your estate plan, and even possibly minimize capital gains taxes.
The big picture
Heirs of assets that are not put in a trust can face the maximum amount of taxation for their situation. Overall, assets placed in a trust avoid probate, a potentially long and expensive process with court costs and executor’s fees that your heirs will be responsible for. Privacy for you and your heirs is another benefit of trusts, unlike wills which are probated in a court of law and become public record.
Now, let’s explore your trust options. A living trust, also called a revocable trust can be modified during your lifetime. You or another person serve as the administrator for the rest of your life, with another taking over after your death. An irrevocable trust cannot be modified once established, but it gives you many benefits to the heirs of your estate. This type of trust can:
- Protect assets from lawsuits
- Protect assets from debt collection efforts
- Minimize capital gains taxes
So while irrevocable trusts are a less flexible option, their benefits could be the right solution for your estate.
A gift to your beneficiaries
Estate planning now reduces the burden on your loved ones after you pass. If you have a trust in place for your family and other beneficiaries, you give them the gift of privacy, reduced costs and a more streamlined process to settle your estate. An experienced estate planning lawyer can advise on how decisions you make now can minimize the cost to your heirs when they inherit assets.