A good estate plan serves two primary purposes. It determines your legacy when you die and helps protect you when you are older and vulnerable. A will gives you a space to name a guardian for your children and beneficiaries for your property. Advance directives allow you to clarify your health care preferences, while powers of attorney can give people the authority to handle practical matters if you become incapacitated.
Many people focus so much on those individual documents that they fail to consider another kind of document that can achieve multiple goals simultaneously. Trusts are incredibly valuable for both your protection when you are older and estate proceedings after your death. What are some of the reasons that adults integrate trusts into their estate plans?
For financial stability as they age
You never know if the company paying your pension might mismanage funds and leave you without support later in life or if your health issues in your golden years will require extensive medical care. Creditors could come after your property while you are still alive or make a claim against your estate after you die, consuming most of your property and leaving nothing for the people you love.
A trust helps protect your property from creditor claims against you or your estate. As an added bonus, a trust created years before you apply for Medicaid will make it easier for you to get benefits for healthcare later in life.
For tax purposes
Your most valuable property could potentially be worth enough to trigger estate taxes. Multi-million dollar estates will have to pay a flat tax based on how much they exceed the current exemption threshold. Georgia doesn’t levy an estate tax, but all Georgia estates are subject to federal taxes.
Transferring major assets like investment accounts, real estate and even businesses into trusts can diminish someone’s personal holdings so that estate taxes are less likely to apply.
For long-term control over their legacy
When you decrease property to someone in a will, they have absolute control over those assets once they receive them. They could sell the house that you wanted to keep in the family or spend every cent that you saved your entire life on a frivolous shopping spree.
A trust gives you the option of limiting how much people access or the intended use of trust resources. You can protect the people you love from their own bad habits while also ensuring that your legacy leaves a lasting and positive impact rather than a short-lived and unimportant one.
Adding a trust to your estate plan can benefit you and also the people who depend on you which is why learning more about trusts may benefit those creating or updating their testamentary documents.