Trusts. You may have heard some buzz about them. Trusts can protect a lot of an individual’s wishes and give some control over an inheritance after an individual’s death. 
A trust is a legal relationship. Basically, a trustee holds assets for the benefit of beneficiaries. The trust agreement or trust instrument governs how and when the beneficiary gets the payout. Not every beneficiary has the requisite financial acumen at the time they would inherit money. One my estate planning mentors tells me that most high school kids would take all of their inheritance and spend it on the most expensive car they could possibly buy. This is one situation where a trust could be used to pay out the inheritance over time rather than in one lump sum.
Trusts are also beneficial because they can help individuals avoid probate if they are properly funded. In order for a trust to be funded certain assets must be transferred to the trustee. This is how the trust can avoid probate. After someone dies, the successor trustee of a trust takes over the management of the trust assets. It is important to work with an attorney to determine which assets should be owned by a trust. Just like individuals trusts can be required to pay incomes taxes. Theses taxes are assessed in tax brackets just like individual income taxes. However, the top trust tax rate for trusts is assessed at just $12,500 of income. Since trusts can hold assets of significant, a trust funding mistake can easily lead to a hefty tax bill. Your attorney can steer you clear of a situation like this.
It is important to note that there are a lot of ways to avoid probate. If someone is considering getting a trust solely to avoid probate, that is not a very good reason.
To get started with trust planning, contact me today!
