If you’ve been contemplating the various estate planning options that might be available to you and haven’t yet considered the advantages that a family trust might offer, then you could be missing out on an important opportunity for your legacy planning needs. For individuals with any real assets in their estate, one of the highest planning priorities should be to preserve that wealth for future generations. Trusts can offer a level of flexibility and efficiency that make them indispensable components in many estate plans. In fact, there are four key family trust benefits that can positively impact most estate planning efforts.
What is a Family Trust?
A family trust is a type of trust that is set up to benefit the members of your family. The trust itself is used to divest yourself of assets while still maintaining some control over them while you’re alive. Moreover, the family trust can also enable you to receive the benefit of those assets, while naming beneficiaries who will receive them when you die. If you’re familiar with trusts, then you probably already have at least some understanding with respect to the elements needed to create any trust entity.
A trust has to have several key elements to work properly:
- A Trustor (also known as the grantor, or settlor). This is the person who establishes the trust and usually ends up being the one who actually funds it by transferring assets into it. For your trust, you are the trustor. Alternatively, if you’re married, you and your wife can both be the trustors.
- A Trustee or Trustees. This is the person (or persons) charged with the task of administering the family trust and ensuring that the terms of the trust are properly executed for the benefit of any named beneficiaries. With a revocable family trust, you will most likely name yourself as the trustee and name a successor trustee to take over administration in the event that you die or become incapacitated.
- The named beneficiaries in your trust are the people who receive the benefit of the assets owned by the trust. In a family trust, the trustor typically includes other family members as beneficiaries.
- The Trust Document. This is simply the document that establishes the trust, names the trustee and his or her duties, lists the beneficiaries, and outlines the terms by which the trust is to be administered.
- Trust Assets. These are your assets that you transfer over to the trust to ensure that it is properly funded.
Four Key Benefits
The family trust can offer a multitude of benefits, but most families find that there are four common advantages that almost everyone can enjoy:
- Reduction of Estate Taxes. With a family trust, married couples can use that vehicle to hold assets so that they are not counted for estate tax purposes. That can be an important way to shelter assets and preserve them for the family legacy, rather than losing them to the federal estate tax. Moreover, those assets in the family trust are then free to continue to grow in value over time, providing an opportunity to build even more wealth for other heirs – since estate tax liability won’t attach to the assets in the trust until the surviving spouse passes away.
- Your Family Trust Can Control Distributions. Like other trusts, your family trust can be used as a legacy planning tool to take care of the needs of not only your children, but future generations You can have stipulations in the trust that provide for certain distributions to pay for things like college, job training, heath care necessities, and more. You can even designate staggered distributions, giving heirs certain assets when they reach specific milestones in life or at certain specific intervals of time.
- Your Family Trust Avoids Probate. This might not be a major concern for some small estates, but if you have a complex estate or one with significant value then it’s definitely something to consider. Probate may be a legal necessity to ensure that many estates get properly settled when people pass away, but there is no denying the fact that it can be costly and time-consuming. Moreover, it often leads to family conflict as surviving heirs battle over their inheritances or contest the will or the actions of the executor.
Because trusts contain all of the mechanisms necessary to execute a legal transfer of ownership to heirs, there is no need for probate. That means that your heirs can quickly receive the benefit of your legacy, without waiting six months or a year for a court-supervised process to be completed. This can be of particular benefit when you have dependent heirs who rely on your income and wealth for their support.
- Keeping Wealth in the Family. Some people want to avoid having their assets being funneled to people outside of their immediate family. For example, you may be concerned that your spouse will remarry when you die, and that your children or grandchildren may be locked out of their inheritances as the new family receives the benefit of your wealth. A family trust can be written to ensure that your loved ones are provided the legacy they deserve.
Of course, any family trust’s full range of benefits can vary, depending upon how the trust document is created and worded. That’s why you should always consult with a seasoned trusts attorney to ensure that your family trust meets your specific legacy planning needs.
At Biddinger, Bitzer & Estelle, PLLC, out trusts attorneys have the experience you need to help you create a family trust that can benefit your loved ones and further your estate planning objectives. We’ll work with you to evaluate your current circumstances and create a plan that helps you to achieve your legacy goals in the most efficient and effective manner. To find out how you can protect your assets and your family’s interests with family trusts, contact us at our website or call us today at (989) 872-5601.