Trusts & Estate Planning
Many people have the wrong idea about trusts. They believe trusts are only for the extremely wealthy who leave big trust funds for their children. The truth is that trusts can help millions of people in Utah who are planning for their estate.
Trusts are merely agreements in which one person or entity holds property for another. In estate planning, the person doing the planning, the settlor, creates the trust. He or she authorizes another individual, the trustee, the power to manage the trust’s assets for the beneficiaries.
There are several reasons to consider a trust. Establishing a trust can help to minimize taxes. They can also provide for the needs of beneficiaries who are not yet considered legal adults.
There are many types of trusts that can be useful in estate planning:
- Trusts for minor individuals – Many people choose to establish a trust in order to leave money to children or grandchildren. That way the beneficiaries can make use of the money when they are younger for things like education or medical expenses. They may also receive money to spend however they want when they reach a certain age or achieve a certain goal like graduating from college.
- Special needs trusts – These types of trusts allow a person to leave assets to individuals with special needs and also protect government benefits. Since most individuals with special needs receive benefits from the government, a sudden inheritance would disqualify them from those benefits. Special needs trusts allow them to have some extra money while protecting government benefits.
- Revocable living trust – Revocable living trusts are mostly used to avoid probate, particularly in states where the probate process is burdensome. They are also used in other cases like when a person owns property in several states. Revocable living trusts are separate from wills but are sometimes used in conjunction with wills.
- Irrevocable life insurance trusts – An irrevocable life insurance trust, or ILIT, may be helpful in removing an individual’s life insurance benefits from his or her estate. This is generally for estate tax purposes.
- Martial trusts – Couples may establish trusts in order to benefit their spouses for tax purposes or to protect property. Trusts can be helpful in blended family situations in which there might be children from previous marriages.
- Spendthrift trusts – These types of trusts are usually created in order to shield the assets from creditors as well as beneficiaries who might not be responsible. The trustee named in a spendthrift trust has total discretion over how to distribute its assets.
Each of the various types of trusts can be customized in order to accomplish the desires of those planning their estate.
Wilson Law Offices - 1555 E. Stratford Ave., #100, Salt Lake City, UT 84106 - 801-467-5800