Should You Have A Trust?
You’re just starting the estate planning process and learning about the different kinds of documents you’re going to need to include in it. Now you’re wondering: should you have a trust? By learning the answer to this question, you can go about the process in the best way possible with the help of an estate planning lawyer.
Entz Burton & Associates, estate planning lawyers, have assisted Oklahoma families and family-owned businesses with estate planning and business law for over 30 years. Reach out to us today to schedule your free consultation and learn if you need a trust.
What Is a Trust?
Though you’ve heard the word “trust” thrown around, you may not be sure exactly what it means. Essentially, a trust is a fiduciary agreement where a third party, also called a trustee, holds assets for one or more beneficiaries. Typically, people will use a trust in order to avoid probate.
Probate is the legal procedure that your estate goes through once you pass away. During probate, the court will authenticate your will – if you have one – and approve the executor you name so that they can distribute your assets to your heirs in your will. The process is time-consuming on its own, but it becomes even more complicated if you don’t have a will. The courts are going to need to handle everything for you and your loved ones, which you don’t want to happen.
Along with avoiding probate with a trust, there are other benefits of setting up a trust. First, you’ll also be able to save time and money on court fees. You might have the chance to reduce your estate taxes, too.
Additionally, you can control what will happen to your wealth and assets when you pass away. You’ll also be able to protect your assets from beneficiaries who may not manage money well or your heirs’ creditors who are coming after them. Since probate is a public process, if you avoid it, you can keep your estate planning process private and protect everyone involved.
Revocable vs. Irrevocable Trust
There are two kinds of trusts you’ll need to consider: a revocable and an irrevocable trust.
A revocable trust is also called a living trust. Assets can pass outside of probate, but you will be able to retain control of your assets while you’re alive. You can dissolve it or change it at any time and it will only be irrevocable once you’ve passed away. For example, if you get remarried and want to change your beneficiaries, you’ll be able to do that.
You’ll need to make provisions for a successor trustee to oversee your trust if you become incapacitated or when you die. Typically, you will still need to pay estate taxes if you have a revocable trust.
Most people choose to use a revocable trust instead of an irrevocable trust, which cannot be changed once you establish it. An irrevocable trust is helpful if you work in a field where you could be sued, like the medical or legal fields. Also, you can protect your assets from creditors with an irrevocable trust.
The Different Types of Trusts
Along with a revocable or irrevocable trust, there are special kinds of trusts you can set up with the assistance of your estate planning lawyer.
A charitable trust is one that will benefit a charity or organization of your choice. Many times, they are established to lower or circumvent the estate and gift tax.
You can set up a special needs trust for a beneficiary who receives money from the government and can’t lose those benefits.
A bypass trust is also called a “B” trust or a credit shelter trust, and you can set one up to bypass the surviving spouse’s estate to take advantage of the federal estate tax exemption for each spouse.
A generation-skipping trust allows the assets in the trust to be distributed to grandchildren (or great-grandchildren/later generations). You can avoid the estate taxes or generation-skipping tax on the subsequent death of any children you have.
A Grantor Retained Annuity Trust (GRAT) is an irrevocable trust that is funded through gifts by its grantor. It shifts future appreciation on quickly appreciating assets to the next generation while the grantor is still alive.
There are other types of trusts you can use depending on your situation. Just ask your lawyer which one is best for you.
Should You Have a Trust?
A trust is very helpful if you want to avoid probate, which is a lengthy process that will cost your estate money. In addition, a trust will allow you to be specific about when, how and to whom your assets are given. If you are worried about your health in your later years because of your genetics – for instance, both your parents had Alzheimer’s – then you can ensure your assets are distributed how you want while you’re still capable of making that decision. Trusts are also flexible (as long as they are revocable), meaning you can change them should your life circumstances shift.
Some people may choose to create wills with trust provisions, which are called testamentary trusts. They work like other trusts, except that they still might have to go through the probate process. The probate court could gain control over the trust and distribute your assets differently than you intended.
One of the downsides is that a trust is typically more expensive to set up than a will. Many times, it is also more complicated. While you might spend more on an estate planning lawyer to help you create your trust, you’ll be saving on the probate costs and ensuring your money goes exactly where you want it.
When you go to an estate planning lawyer, come prepared with information about your net worth and assets you have. You should keep in mind who you want your beneficiaries to be, considering who among your loved ones will manage your assets properly. If you are married, you need to consider the fact that your spouse could pass away before you, so you may want to have a child or another loved one in mind who can help you carry out your wishes.
With estate planning, you can guarantee that your assets are going to be distributed in a way that aligns with your values, as well as protect your loved ones and reduce the chances of them getting into conflicts over the estate. That will give you peace of mind as you plan.
Contact Entz Burton & Associates
If you need help creating a trust for your estate plan, then get in touch with Entz Burton & Associates today for your free consultation. Call us at 405-773-9800 or 800-633-7230, or contact us on our website. We look forward to hearing from you and helping you.
Attorney J. Michael Entz at Entz Burton & Associates is an experience lawyer in estate planning law, business formation and asset protection serving the families in Oklahoma City and Weatherford office.
