Putting together an estate plan is the best way to make sure your family and property are taken care of when you eventually pass away. It can also provide for your care while you’re living, giving you control and flexibility that a simple will may not. Here’s what you need to know about establishing a trust for your estate plan in Miami, FL.
What is a trust?
Creating a trust allows you to appoint a third party to manage the funds if and when you cannot, such as when you’re traveling or if you’re incapacitated. The person who creates the trust is called the “settlor,” and the person who manages the trust on their behalf is the “trustee.” The person(s) or organization that will ultimately receive the funds is the beneficiary.
There are two basic types of trust: living and testamentary. Living trusts are created when the settlor is still alive, while testamentary trusts go into effect upon the settlor’s death. Testamentary trusts are usually used to leave property to beneficiaries after one’s death, especially if the beneficiary is a minor child.
Living trusts are either revocable or irrevocable. Revocable trusts mean that the terms and beneficiaries can be changed during the settlor’s lifetime, such as in the case of divorce or death of a beneficiary. The assets are still part of the settlor’s estate. In contrast, irrevocable trusts may not be changed and the assets are no longer considered part of the settlor’s estate. The type you choose will depend on what you’re trying to accomplish and who will benefit.
Why would I use a trust?
Here are some reasons to use a trust:
- Avoid probate: Probate is a long legal process that can drain your estate funds. It’s also a difficult experience for your loved ones, as they have to deal with legal issues while grieving. Putting your major assets into a trust and naming a beneficiary can help you avoid the probate process.
- Keep tax liability low: When a person receives gifts of property from a will, they may be subject to taxes. Putting these gifts into a trust ensures that their tax liability will remain as low as possible.
- Control disbursement: When you write a will, you don’t have a lot of control over how an asset is disbursed. Typically, you can only control who gets it, not how they get it. When you have minor children or spendthrift loved ones, this can be a problem. You can set up trusts to provide for your beneficiaries without allowing them to blow through their inheritance right away, or keep the money safe until a minor child reaches a certain age.
- Avoid creditors: If you put your assets into an irrevocable trust, they should be protected from any creditors who might otherwise have had a claim.
Are you interested in finding out how creating a trust and appointing trustees can round out your Miami, FL estate plan? Reach out to the team at Ruben J. Padron, PA today to arrange a consultation.
Categorised in: Estate Planning