Planning for your Financial Future? 5 Reasons you want to create a Trust
Tuesday, August 11, 2015, 6:00 AM | Leave Comment
Trusts are legal documents containing instructions on how and when to distribute an individual’s assets after their death. Trusts are established by a grantor and hold assets for a person or group referred to as the beneficiary.
While trusts may not be for everyone, they do provide many benefits that wills do not.
Here are some of the reasons to create a trust:
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To Protect Assets for Beneficiaries
This is arguably the most important reason to have a trust. If you are concerned that a beneficiary may not be able to handle a lump sum, you may use a trust to parcel the money out to them to keep them from squandering it.
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To Avoid Probate
This is one of the main reasons that people establish trusts. By avoiding probate, it is possible to save time and legal fees while also reducing paperwork considerably.
However, it is important to note that trusts can wind up going through probate even though they allow it to be bypassed. This is to limit the liability period for creditors’ claims.
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To Avoid Taxes
Irrevocable trusts shelter the payouts of life insurance policies from the IRS. Without an irrevocable trust, the proceeds would go into the deceased person’s estate and be subject to estate taxes.
Beneficiaries will still receive the proceeds of the policy, but without having to pay a substantial portion in taxes.
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Protection from Contest
If someone decides to challenge the distribution of assets, a trust will provide greater protection when compared to a will.
While it is still possible to challenge a trust, it involves a more complicated and expensive process.
Consider the fact that contesting a will in probate court costs nothing whereas a trust contest must be heard in civil court and will require the payment of substantial filing fees.
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Private Distribution of Assets
Probate is a public process, which means that anyone can look at the estate file. They can find out the names of the relatives and beneficiaries and see the claims of creditors and the list of assets.
In recent times, probate courts have even been publishing this information on the Internet. A revocable trust will prevent this, as it is private and not filed with the probate court.
Trusts are complex legal structures that take a lot of time to set up and to oversee. If you are considering setting up a trust, it is a good idea to consult a lawyer with experience in setting up trusts and who has a thorough knowledge of applicable Florida laws.
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