Establishing a trust can be a vital legal tool for asset protection, control over assets, probate avoidance, potential tax benefits, and asset management continuity. Trusts can also facilitate charitable giving and ensure financial support for loved ones with special needs. By working with an experienced Peoria trusts lawyer, you could create and tailor a trust to fit you and your family’s unique situation.
If you are considering establishing a trust in Peoria, AZ, contact Pennington Law, PLLC, to speak with a knowledgeable and compassionate estate planning lawyer right away. We will discuss your specific situation and goals, and we will work to establish a trust that gives you peace of mind and a lasting legacy for your beneficiaries.
What Is a Trust?
A trust is a legal entity established by a person called a grantor. The grantor appoints a trustee to manage the assets held in the trust. Typically, the grantor is also the trustee and controls the assets while alive.
A designated successor trustee takes over when the grantor passes away. That person must manage the trust and distribute the remaining assets to named beneficiaries according to the grantor’s wishes.
What Are the Benefits of Creating a Trust?
A trust can be beneficial for multiple reasons, including:
- Avoiding Probate – Probate is the court process of validating a will and authorizing the distribution of property. With a trust, beneficiaries can bypass probate and receive the assets left to them faster.
- Flexibility – A living trust is flexible if you create a revocable one. You can transfer assets into and out of the trust while alive, change beneficiaries, or revoke the trust entirely.
- Preventing Disputes – A trust might prevent disagreements over the property after you die. Choosing specific people to inherit particular assets eliminates arguments over who should get what.
- Better Privacy – If you don’t want your finances to become a matter of public record, create a revocable trust. Because it doesn’t go through probate, no one can access your personal and financial information online.
- Assigning Guardianship or Durable Power of Attorney – You can use a living trust to control how much a guardian spends on raising your minor child. You can also authorize someone to make your decisions if you can’t speak for yourself.
- Minimizing Estate Taxes – One of the problems with an inheritance is the tax implications heirs can face. Incorporating the appropriate provisions into your trust agreement can help reduce taxes.
What’s the Difference Between a Revocable Trust and an Irrevocable Trust?
You can choose from multiple types of trust, but only two categories are available – revocable or irrevocable.
A revocable trust is more flexible than an irrevocable trust. You can name yourself the trustee, allowing you to manage the assets held in the trust during your lifetime. Your designated successor trustee can’t access your trust at any time while you’re alive. However, they are authorized to manage it when you die or, if included in the agreement, become incapacitated.
With an irrevocable trust, you transfer property ownership into the trust. That means the trust owns your assets, and you relinquish control while alive. If you want to change anything, you must obtain approval from a judge or a signed agreement from the beneficiaries. Although you have less freedom with an irrevocable trust, you can protect assets from certain estate taxes and creditors, unlike a revocable trust.
What Is an Irrevocable Life Insurance Trust (ILIT)?
An ILIT is a tool for managing a life insurance policy. It is an irrevocable trust, so you can’t terminate or alter it after establishing it.
Typically, the grantor transfers funds into the trust to pay the insurance premiums. Upon the grantor’s death, the successor trustee manages the benefits from the life insurance policy by distributing the proceeds to named beneficiaries without estate tax liability.
What Is a Special Needs Trust?
A special needs trust is a beneficial legal agreement between a disabled or chronically ill individual and a trustee. The person benefiting from the trust can receive income without affecting their eligibility for Social Security benefits, Medicaid, and other public assistance.
A grantor establishes the special needs trusts and chooses a trustee to oversee asset distribution. The designated beneficiary can supplement expenses that government programs don’t cover, such as:
- Caretaker payments
- Transportation costs
- Medical bills
However, trust funds are not for paying housing or food expenditures covered by government benefits.
What Are Other Common Trusts?
Other types of trusts are available that serve different purposes, including the following:
Credit Shelter Trust
A credit shelter trust is a type of irrevocable trust. It benefits one spouse after the other spouse’s death. The surviving spouse receives property without an estate tax liability.
You can establish a generation-skipping trust if you have grandchildren. It bypasses your children, giving your grandchildren control of trust assets.
Qualified Personal Residence Trust (QPRT)
You can transfer ownership of your home into a qualified personal residence trust (QPRT). That takes your home out of your estate to lower the value and reduce estate taxes. You maintain control over the home while alive, meaning you can continue to live in it and retain an interest in the property. When you die, the beneficiaries you select assume ownership.
Qualified Terminable Interest Property Trust (QTIP)
A qualified terminable interest property trust (QTIP) is a valuable tool for married couples. It protects a surviving spouse from estate taxes and safeguards marital assets. The surviving spouse can access the trust assets upon the other spouse’s death for income and other distributions.
You might want to give back to your community or organizations close to your heart. With a charitable trust, you can donate some or all of your assets to charities of your choice. You might avoid a capital gains tax and qualify for an income tax deduction depending on the circumstances.
A children’s trust is essential if you have minor children. You can protect their financial future by preparing for the worst-case scenario. If you create a children’s trust and die when the beneficiary is a minor, your chosen successor trustee is authorized to manage trust assets according to your instructions. You might decide you want your child to assume control of the trust when they turn 18 or another age. You can also determine when they can access funds and for what purpose.
A spendthrift trust is beneficial if you worry about your beneficiary’s spending habits. With this type of trust, the successor trustee can use their discretion to decide how much money to distribute to the beneficiaries and for what purposes. They can also determine how often they allow disbursements.
How Can a Peoria Trusts Lawyer Help Me?
Setting up a trust might seem simple, but the process can be complex. You can choose from many kinds of trusts to meet your interests and secure your family’s future. Although you can’t really select the wrong one, some might benefit you more than others. You should not create a trust without help from a Peoria trusts attorney from Pennington Law, PLLC.
When you hire us, we will review your finances and advise you of the options suited to your needs. No two clients are alike. That means the type of trust we pick for you and the function it performs will differ from someone else’s. You will receive legal guidance while we customize a trust to provide the protection you need and cost-saving benefits.
Because there aren’t one-size-fits-all solutions regarding trusts, an experienced trusts attorney will consider various factors to help you decide what will work best for your situation. Some essential information we will discuss with you might include the following:
- Your Successor Trustee – We will explain the successor trustee’s role and determine who might be the right fit. The person you choose should be someone you trust. They will be responsible for managing your assets and transferring everything according to your wishes. You might think you must pick a relative, but any adult can be the trustee of your living trust, even if it’s a friend or co-worker.
- Types of Trusts – We can outline each type of trust’s purpose and advantages and disadvantages. After reviewing your family structure and needs, we can suggest which trust can help. Sometimes, creating multiple trusts is crucial to offer significant asset protection and ensure your loved ones benefit from financial security long after you’re gone.
- Goals – Your goals are one of the most crucial aspects of establishing a trust. We want to know why you decided to set up a trust and who you want it to protect.
- Estate Size – One of the many benefits of a trust is its ability to bypass probate. That allows your family to receive the assets you leave to them without going through the time-consuming and costly probate process. However, the size of your estate can affect the types of trust you should execute. It might make sense to transfer specific assets into one type of trust but others into a different kind of trust for maximum protection and tax benefits.
- Children – Some trusts are better than others if you have minor children, grandchildren, or dependent relatives. You should consider your options and let us guide you in your decisions.
Contact a Peoria Trusts Attorney Today
Establishing a trust today will protect your assets, ensure your wishes are carried out, and provide for your loved ones. An experienced Peoria trust lawyer from Pennington Law, PLLC, is here to help you create a personalized plan that addresses your specific needs and goals.
Secure your legacy and safeguard your family’s future by taking advantage of our professional guidance. Contact us by phone or online today to schedule a consultation and take the first step toward lasting peace of mind.