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5 Reasons Why You Should Consider a Family Trust
Considering future generations and what you want your legacy to be for the family you leave behind is an essential part of estate planning. While a last will and testament is a first step, many people can benefit from a more comprehensive plan that involves other estate planning tools, such as trusts. A trust allows you to protect your assets and ensure that your beneficiaries get their inheritances according to your wishes. A family trust is a special kind of trust that designates family members as your beneficiaries and appoints a trustee to manage the assets.
At Rainey & Rainey, PLLC, Attorneys at Law, we have helped countless clients create family trusts to preserve generational wealth and ensure their loved ones are cared for after passing. Here are five of the most significant benefits of using a family trust.
1. Your Assets Avoid Probate
When someone dies, their estate must go through probate. This involves filing the will with the appropriate county probate court and scheduling a hearing. At the probate hearing, the judge will determine if the will is valid and if the estate executor can fulfill those duties. Assuming the answer to both is yes, the executor must then inventory the estate to value all the assets. The estate will then be settled by paying off any outstanding debts before the remaining assets are distributed to the beneficiaries in accordance with the will. This is a lengthy process, meaning the beneficiaries may have to wait several months before they actually receive their inheritance.
Trusts bypass this process because they don’t have to go through probate. The trustee can distribute any assets contained in a trust directly to the beneficiaries in accordance with the terms of the trust.
2. There May Be Some Tax Benefits
While Texas doesn’t have state-level estate taxes, your estate may still be subject to federal estate taxes. Depending on the value of your estate, these could be substantial. However, you can leverage a trust to avoid some of these taxes. To provide this benefit, the trust must be irrevocable, meaning that the terms and beneficiaries are almost impossible to change once the trust is established. Because ownership of the assets is transferred at the creation of an irrevocable trust, those assets are not part of the valuation of your estate for federal tax purposes when you pass.
If you’re interested in using a trust as a way to lower estate taxes, it’s crucial to work with an experienced attorney. Creating an irrevocable trust means you can’t change your mind later on, and there may be other strategies to use that provide more flexibility while still preserving as much of your estate as possible.
3. It Provides More Privacy
The probate process is part of the public record, and that may include a list of beneficiaries and an inventory of the assets. That means anyone who goes to the courthouse is able to get detailed information on your estate, including specific assets and their value. Many people choose trusts because of the privacy protection they offer. Because they aren’t part of the probate process, any assets contained in the trust won’t be subject to the public record. If protecting your beneficiaries’ privacy is important to you or you would prefer that your assets aren’t made public, establishing a family trust is one way to achieve these goals.
4. You Have Greater Flexibility in Determining How Your Assets Are Passed On
One of the main advantages of creating a trust is that it offers a high level of customizability for the distribution of assets to your beneficiaries. For example, you can set up a trust to pay out a specific sum per year as a kind of maintenance income, or you can set it to pay out at particular milestones, such as getting married or purchasing a home.
This can be especially helpful for family trusts when you’re dealing with multiple beneficiaries or when you want to ensure that future generations also get to benefit. Trusts are also particularly valuable for blended families, as they can ensure your spouse is cared for after your death while still guaranteeing that your children inherit from your estate. Finally, a trust can be an excellent option if you’re concerned that a beneficiary may be irresponsible with a lump sum of money and you want to have more control over how they receive their inheritance.
5. It Protects Your Assets
We’ve already talked about how certain types of trusts can reduce your estate tax burden, but trusts can also protect your assets in other ways. They aren’t considered part of your estate for settlement purposes, which means creditors can’t make any claims against assets that are held in the trust. A well-crafted trust can also protect your assets in the event of a divorce to ensure your legacy goes to your children and grandchildren instead of to an ex-spouse, for example. The best way to set up a family trust depends on your overall estate plan, what kind of assets you want to protect, and who you want to name as your beneficiaries. An attorney can work with you to take all of this information and create an estate plan, including a family trust, that works for your needs.
At Rainey & Rainey, PLLC, Attorneys at Law, we understand that these conversations can be sensitive, but we also believe that planning for the future can provide peace of mind for you and your loved ones. If you have questions about estate planning or how to set up a family trust, call our office at (254) 457-5083 to get started.
