Getting the Most Out of Your Trust
The trust is one of the best tools at your disposal when it comes to estate planning. They have several advantages over wills and other asset-holding arrangements. Trusts are more private and allow your loved ones to avoid probate. They let you decide how your beneficiaries use your assets, too. Beyond this, these assets protect your beneficiaries from creditors while providing good tax options.
A good estate plan focuses on maximizing your trust’s effectiveness. When used in the best way, trusts are often your most useful tool. That is why we’re writing this article to cover the best practices when forming this asset. To learn more or ask for more details on effectively using a trust, please contact us at Dowd Law today.
1) The Right Trust for the Right Job
There are so many kinds of trust that trying to list them all in a single article would be a challenge. Some estates may need multiple. This is especially true if you’d like to pursue specialized interests, such as transferring cryptocurrency ownership. A qualified personal residence trust can reduce your estate’s value by removing a property from it. This can be useful if you expect homes to increase in value. Trust advisors can help you zero in on the most effective trust, or trusts, for your situation.
2) Fund the Trust
Though this is a standard part of opening this system, many people neglect to do so. Take inventory of your assets, and make sure as many of them as possible are transferred to the trust. Just drawing up the trust does not transfer ownership. Bank accounts, stocks, bonds, properties, and business interests must be retitled. Things you own and intend to pass on must be assigned to the trust. This includes accounts like life insurance or retirement accounts.
3) Make Gifts of Non-Trust Assets
Gifting money, making charitable donations, and exchanging assets in this way reduce the tax burden of your estate. By lowering its total value, you make it easier for your beneficiaries to receive your trust assets. The gift tax limit has risen to $16,000 in 2022 compared to the limit of $15,000 in prior years. You can gift that much each year for each person before paying gift tax. Gifts to spouses don’t usually have a gift tax applied, though.
4) Regularly Update Your Plans
As mentioned in the last point, laws change all the time. Situations and the relationships of family members change. For example, you might decide to leave some assets for a newborn child in the family. You may decide that you could better serve a family member with a different sort of asset. In cases like this, you should always update your estate planning documents to reflect your wishes.
5) Gather All of Your Paperwork
Establishing a durable power of attorney, designation of beneficiaries, and writing a letter of intent are all very important. The goal of the trust is to eliminate ambiguity regarding your intentions. It allows your loved ones access to the resources and assets they need to live comfortably. It allows them to avoid challenging, expensive fights over your estate. Most of all, it allows you to rest easy knowing that your wishes will be followed to the letter.