Trusts Avoid Problems And Protect Assets
A good estate plan will avoid problems and protect your assets. Usually, a modern day estate plan will use revocable trusts to:
(1) avoid probate and perhaps,
(2) leave assets in a protected manner- “in trust”.
Using trusts as vehicles to transfer assets and using trusts as a receptacle for assets are two different things. Using trusts as vehicles to transfer assets is to keep your affairs private and to avoid unnecessary court involvement and expense. Using trusts as a receptacle for assets is to leave assets in a protected manner.
Question: When we leave assets “in trust” what are we using trusts to protect from?
Answer: unnecessary estate taxes, unnecessary acceleration of income taxes on retirement plans, unnecessary exposure to loss in a lawsuit such as a medical malpractice claim, a car accident, a divorce.
Question: When we leave assets “in trust” what are we using trusts to accomplish?
Answer: estate tax avoidance, asset protection and control.
Question: What do I mean by control?
Answer: Well, you can use trusts to control assets and determine who will ultimately benefit.
Example: A can leave to B in trust for B’s benefit with remainder to C. The result could be that B has control and benefit of funds during B’s life but when B passes, C becomes the beneficiary. What does this do? It can assure assets will stay in bloodline. It can assure that you can benefit a loved one if they survive you, and guarantee the remainder will go to another loved one. The best example of this is in a second marriage. Let’s say Jack and Jill are a married couple and they do not have a prenuptial agreement. They also each have a child from a prior marriage. They agree that all their assets are separate and will go their child but they want to provide the survivor with the ability to live in the house during their life and to make sure that their half then goes to their child. Using a trust is the best way to accomplish the above.
Mark F. Winn