TRUSTS
Helping Clients Create Asset Protection for Their Loved Ones
If you have important assets or beneficiaries you’d like to take care of, you’re probably starting to think about Estate Planning. Estate Planning is an essential component of protecting your loved ones after you pass. Creating a trust is an excellent option for those who wish to reduce tax liability, minimize the impacts of probate, and maybe most importantly, create Asset Protection for their loved ones! If you are considering creating a trust, consulting a team of Connecticut trust lawyers is the next step.
At Legacy Law Partners, PLLC, our team has years of extensive experience providing knowledgeable guidance regarding Estate Planning and trust creation. We understand just how important it is to protect your assets, control distribution after you pass, and therefore create your Legacy by leveraging a well formed trust! Plus, the right kind of trust can potentially reduce your tax liability, leaving more money to your family members.
What is a Trust?
A trust is a legal document that is an essential and foundational component of any A+ Estate Plan. Generally, a trust is an arrangement that allows a third party (also called a trustee) to manage assets on behalf of beneficiaries. There are many different types of trusts and ways they can be set up, and the trust’s creator gets to specify precisely when and how those assets are distributed.
At Legacy Law Partners, PLLC, we’ve created an Estate Planning “culture” that heavily favors the use of trusts for our client’s trust beneficiaries, as opposed to outright releases of their inheritance. The management of assets “in trust” for their benefit brings about substantial protections against divorcing spouses, lawsuits, creditor attacks and bankruptcy proceedings. This practice of creating Asset Protection for the next generation is the backbone of who we are as an Estate Planning law firm!
Because there are many types of trusts and they are complicated documents, consulting a team of Estate Planning attorneys is essential. Trust agreements must not only be lawfully written, but contain the proper structure, design and managerial oversight, in order to provide Asset Protection for our loved ones. Our team of Estate Planning attorneys will review your family and financial situation, as well as learn what’s most important to you within your Estate Planning, in order to determine the right kind of trust for you.
What Are the Benefits of Having a Trust?
Trusts have many benefits, and they are not just for high-net-worth individuals. By creating the right trust for your estate, you can greatly reduce the impacts of the probate process and create Asset Protection for your beneficiaries.
- Protecting your loved ones’ inheritance from divorcing spouses, lawsuits, creditors and bankruptcy proceedings!
- Enhancing your Legacy by controlling your wealth and outlining personalized distribution wishes.
- Keeping your Estate Plan private and ensuring your hard-earned assets avoid having to pass through full probate!
What’s the Difference Between a Revocable and Irrevocable Trust?
When creating a trust, our team will advise you on the best type for your overall Estate Planning goals. While there are many types of trusts, one of the main distinctions between them all is whether they are revocable or irrevocable.
Revocable Trusts
A Revocable Living Trust, which we like to call our “Legacy Trusts,” allow you to control assets while you are still alive. This is because you can be the trustee, with full access and control of the trust’s assets. You can make changes to the document as life changes unfold. When structured properly by the attorneys at Legacy Law Partners, PLLC, these trusts do not have to file a separate income tax return, as they are considered pass-through entities for tax purposes.
If you create a revocable trust, you can name yourself as a trustee to maintain ownership over the assets within the trust. However, because these assets are still under your control, they are still subject to estate taxes and do not lower your tax liability.
Irrevocable Trusts
An irrevocable trust cannot be modified by the trust creator after it has been created. Irrevocable trusts transfer particular assets out of the owner’s control and out of the estate itself. Once the assets have been moved into an irrevocable trust, they cannot be modified or revoked.
Because the assets are no longer under your control, they are not considered part of the estate and are not subject to estate taxes. If you are looking to reduce your estate tax liability, our team will generally recommend creating an irrevocable trust. What’s more, assets properly transferred to an irrevocable trust may enjoy Title XIX (“Medicaid”) protections, subject to the applicable lookback period in effect at the time of the application filing. The combination of estate tax reduction and the potential to create Medicaid advantages is why an irrevocable trust is one of the most powerful Asset Protections Trusts available to our clients.
What Are the Most Common Types of Trusts?
There are many different types of specialized trusts that fall under the main revocable and irrevocable trust umbrellas. Depending on your family situation, financial landscape, goals and concerns, the following trust types may warrant your consideration:
- Irrevocable Life Insurance Trust (ILIT): excludes life insurance proceeds from the taxable estate
- Domestic Asset Protection Trust: this trust can be used to create divorce, lawsuit and creditor protections for your own benefit, if structured and funded properly
- Medicaid Asset Protection Trust: this trust is designed to hold title to certain high-valued assets in order to avoid having to report or spend them within the Medicaid application process
- Charitable remainder trust: aids in charitable giving by donating certain assets to charity
- Special Needs Trust: designates certain assets to family members with disabilities
- Marital trust: provides benefits from trust assets to a surviving spouse
- Bypass trust: makes use of any federal estate tax exemption for each spouse
