You may be among the many people who think of estate planning as solely about making decisions about your things and to whom they should go when you die. While estate planning does involve property distribution according to your wishes, a high-quality plan should also contain instructions for your care if you become disabled, name a guardian for your minor children, and provide for loved ones who may not be responsible with money. Good plans often utilize trusts, which are great tools for helping you manage your assets and saving your family money, time, and paperwork.
Although trusts are often associated with wealthy people, they are actually very accessible to the average person. In fact, since those with modest assets can afford to lose the least, creating a trust can benefit them the most. However, the laws are complex, and establishing a valid trust can be challenging. That’s why the Lexington, KY, trust attorneys at Bunch & Brock are here for you. We understand that each client has goals unique to them, and we work hard to be sure that the finished product offers maximum peace of mind. Our attorneys have extensive experience preparing trusts to serve the intentions and best interests of clients, while providing asset protection and minimizing tax impact. Contact us to find out how we can help you.
Kinds of Trusts
There are different trusts available to address a variety of situations, such as special needs trusts, spendthrift trusts, life insurance trusts, charitable remainder trusts and qualified terminal interest property (QTIP) trusts. Living trusts are designed to make sure your assets are used for your benefit if you become unable to manage them for yourself, and to pass them on to your heirs without going through probate. This type of trust offers more control than wills in complex family situations, allows your descendants to gain access to the assets more quickly, and avoids probate fees, which can be as much as five percent of the value your estate.
What Makes a Trust?
When you create a trust, you become the “grantor.” You designate a “trustee” to manage the trust and its assets – many grantors choose themselves. You write the rules about how the trust must operate, including who will get the funds (the “beneficiary”), when they will get it, and even how they can spend it. Trust funding comes from the money it was given (principal), interest and dividends earned on the principal (income), and any profits from increases in value enjoyed by the principal (capital gains). If the trust is revocable, you can change the rules at any time. If the trust is irrevocable, you cannot. Each form has advantages and disadvantages.
Irrevocable Trusts
When you set up an irrevocable trust, you no longer control the assets or pay taxes on them. For many grantors, this is preferable, because removing the assets from their net worth moves them into a lower tax bracket. There is greater protection of the money if you are sued, and the trust assets are not subject to estate tax when you die. Some people look to this kind of trust to protect assets from being seized as payment for their long-term nursing care, because money in a revocable trust that was intended to be left as part of an estate is vulnerable to nursing home bills. However, a grantor must be careful not to push assets into an irrevocable trust simply to protect them from long-term care facility exposure and then not be able to access them because the assets no longer belong to the grantor.
Revocable Trusts
When you set up a revocable trust, you keep control over the assets and have access to them. Probate is avoided because the money is no longer part of your estate. However, the assets remain yours so you still pay taxes on them, they can still be lost in a lawsuit, and estate taxes still apply. This type of trust is highly customizable and can be tailored to meet your wishes, such as delaying a distribution to a beneficiary until a certain age or protecting assets from your spouse’s new mate if he or she survives you. A revocable trust specifically works well for a grantor who does not have serious tax issues, but wants to maintain control of his or her assets. The main purpose of this sort of trust is to steer clear of probate, thus simplifying the transfer of assets to named beneficiaries. In contrast, the main purpose of an irrevocable trust is to protect assets
We Can Help
Failing to accomplish any estate planning can lead to uncertainty, bitter disputes and increased expenses. Setting up a trust is a valuable way to avoid that unpleasantness and manage your assets. To discuss and create the right kind of trust for your situation, contact the KY living trust attorneys at Bunch & Brock. We have over 35 years of experience helping people navigate the complexities of estate planning. We are committed to providing each of our clients with a high level of personal service, and we will walk you through each of the steps that must be taken. To schedule an initial consultation, please call 859-254-5522 or fill out this online form.
Attorney Matthew Bunch
Matt handles complicated bankruptcies and debt restructuring in Chapters 11 and 13 for both individuals and companies. He has also negotiated with multiple creditors on behalf of his clients to avoid bankruptcy. Matt is the firm’s lead litigator and handles contract disputes, certain personal injury claims and general litigation. [ attorney bio ]
