The notion that estate planning is only for those who are incredibly wealthy is false. Trusts are a popular form of estate planning established to ensure that one’s assets go to predetermined heirs or beneficiaries in the event of their death. During the time that assets are in a trust, they are managed by a trustee. Some trusts are effective immediately, while others are designed to be enforced only after an individual passes.
Before establishing a trust as part of the estate planning process, it is critical to receive proper legal counsel from an estate planning attorney with knowledge of different types of trusts. A reputable Houston attorney can assist you with choosing the best trust for your particular needs.
What Is a Trust?
When assets are put into a trust the act becomes a fiduciary arrangement in which a trustee then manages the assets on behalf of intended beneficiaries. A trust is a tool generally used to minimize estate taxes and avoid probate.
Some of the most common types of trusts are:
- Special Needs Trusts
- Charitable Trusts (including Charitable Lead Trusts and Charitable Remainder Trusts)
- Family Trusts
- International Trusts
- Business Trusts
Special Needs Trusts
A special needs trust is actually a legal document created to help provide for a beneficiary who suffers from a chronic illness, has a disability, or relies on government assistance. Putting this type of trust in place can help ensure an individual still receives government benefits such as Supplemental Security Income and/or Medicaid in addition to trust funds.
In order to draw up an effective special needs trust that will be honored by a court of law, it is critical to enlist the help of an established attorney who specializes in general estate planning and has experience with special needs trusts.
Charitable Trusts
For those individuals who are philanthropic and still want to support heirs after their passing, a charitable trust may be the best option. These can also be advantageous because estate donations, such as real estate or stock, may offer significant financial advantages.
There are two primary types of charitable trusts:
- Charitable Lead Trusts
- Charitable Remainder Trusts
A charitable lead trust is one in which payments are made to a federally recognized charitable organization which then typically yield a tax deduction. The remaining trust property can then be transferred to a predetermined beneficiary.
Charitable remainder trusts are designed to put the beneficiary payments first. A predetermined beneficiary will regularly receive a predetermined amount of money over a specific period of time, after which the money then goes to a preselected charity.
Family Trusts
For some individuals, the primary goal of estate planning is ensuring that their family is provided for. A family trust may be specifically drawn up for this purpose. Depending on an individual’s particular wishes, legal counsel can help them decide if a revocable (changeable) or irrevocable (unchangeable) trust is best.
An attorney with experience in estate planning can assist with:
- Drafting a legal trust document that will be recognized by a court of law
- Choosing a trustee to manage the trust
- Transferring assets into the trust
International Trusts
An international trust can play an important role in estate planning. A unique feature of this trust is that it is considered tax neutral. International trusts are typically considered to offer greater asset protection and may also provide for a higher degree of confidentiality in the managing of personal affairs.
It is vital for an individual wanting to establish an international trust to find legal representation that thoroughly understands the possible advantages between choosing it over a U.S. domestic trust. Look for an attorney with experience in establishing trusts in multiple global jurisdictions.
Business Trusts
Many businesses choose to create a business trust instead of a limited liability company, this is primarily because of benefits such as:
- Feasibility and timely execution
- Additional privacy because it is not required to be filed publicly
- More protection for personal assets should there be legal ramifications from property investment and loan issues
If you have questions about protecting business assets, consult with an attorney to see if establishing a business trust best suits your needs.
Why Hire a Houston Attorney to Assist with Establishing a Trust?
While trusts are a common element of estate planning, establishing them properly can be complex. With several different kinds of trusts to choose from, an individual may struggle to identify which type of trust is most advantageous for their specific situation. This is where an attorney can assist.
A reputable trust attorney can ensure that a trust is designed to:
- Help protect an individual’s assets from collectors
- Avoid probate
- Provide for designated beneficiaries in the desired manner
- Be found valid in a court of law
Before signing with an attorney, verify that they have both knowledge of drawing up a trust as well as ample experience in helping clients successfully establish them.
If you have questions about trusts, would like a consultation about which type of trust is best suited to your needs or if you want to set up a trust, please reach out to us today.