When the subject of estate planning comes up you may hear people discussing a trust they created as part of their plan. Your estate planning attorney may also suggest that you use a trust agreement in your own estate plan. If you have never made use of a trust agreement before you likely have a number of important questions. For starters, you probably want to know why you should put assets in a trust instead of gift them in a Will. There are actually several reasons why gifting assets through a trust often makes more sense than gifting those same assets in your Last Will and Testament. Although your reasons for using a trust in lieu of your Will to pass down assets will be as unique and individual as you are, some of the most common reasons include probate avoidance, retained control over estate assets, tax benefits, and assets protection.
Without a doubt, probate avoidance is among the most common reasons for using a trust in lieu of a Will to pass down assets. Probate is the legal process that follows the death of an individual. The purpose of probate is to ensure that all of the decedent’s assets are identified, located, valued, and eventually passed down to the intended beneficiaries or legal heirs. Probate can take months, even year, to complete and can cost the estate a significant amount of money. Assets in a trust, however, do not have to go through the probate process, making them available to beneficiaries much sooner and saving the estate money.
The desire to retain control over estate assets is another common reason for using a trust instead of a Will to pass down assets. When you gift assets using your Will you lose all control over the asset after it is transferred to the beneficiary. With a trust, however, you can effectively retain a certain degree of control over the asset after it has changed hands and even after your own death. The trust terms can be used to decide things such as when the beneficiary can receive distributions from the trust and how much those distributions will be (including the use of staggered distributions as the beneficiary ages). You can even use trust terms to decide how the trust assets can be used. For example, you might limit the assets to being used only for educational purposes.
The right type of trust can also help shelter estate assets from federal gift and estate taxes. Furthermore, appreciable assets, when transferred into a properly drafted trust can grow in value without incurring additional tax liabilities. Finally, assets held by the right type of trust are also protected from creditors of both the estate and the beneficiaries as well as being protected from spendthrift beneficiaries themselves.
If you have additional questions regarding the use of a trust in lieu of a Last Will and Testament to pass down estate assets, contact the experienced Missouri estate planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.