When preparing your estate plan, you should make an inventory of all your assets and tally their fair market value. This list should include titled assets, such as real estate and bank accounts. If you have designated beneficiaries for these assets, they may pass directly to them without being included in your will. Alternatively, you may prefer to set up a trust to direct your assets to your beneficiaries. A trust allows you to maintain control over the distribution of your assets and the trust is not subject to probate.
A grantor trust allows you to transfer a substantial amount of money tax-free to the beneficiaries of your trust, usually your children and grandchildren. It also allows you to create successive life estates for family members. If you plan to die during your lifetime, a grantor trust is especially beneficial because the property does not count toward your federal estate tax. It also lets you skip more than one generation, which may be particularly useful if your children or grandchildren have poor money management skills.
You can choose between two types of estate planning trust: revocable and irrevocable. Revocable trusts allow you to change the terms at any time, while irrevocable trusts do not. Revocable trusts can be amended or revoked at any time, and they can be updated during your lifetime. If you are considering revocable trusts, make sure that you consider all of your assets before deciding on which one is best for you.
Although trusts are often considered expensive, some attorneys will provide a basic trust package for a flat fee. However, this fee can add up quickly, especially if your attorney spends time discussing your goals. You should also keep in mind that the cost of setting up an estate plan will be higher if your attorney is working for a large law firm, which will charge a higher rate. You should also be aware that the more expensive attorney does not necessarily mean that he or she is the best.
Another benefit of setting up an estate planning trust is that you can easily gift your home to your beneficiaries. This way, your heirs will receive it at a significant discount on its market value. In addition, they will no longer be forced to pay rent or evict any tenants. The property transfer terms are typically negotiated when the trust is set up. However, the benefits do not end there. While a beneficiary can still keep the home, they can also personally deduct real estate taxes and mortgage interest if they have been paid.
Another benefit of setting up an estate planning trust is that you can leave the financial management of your assets to an expert. This person is called a Trustee, and is the legal owner of everything inside the Trust. The Trustee is responsible for managing the Trust’s assets and distributing it to Beneficiaries, as well as dealing with taxes. This person will be responsible for handling the trust’s tax filings. In addition to all of this, the Trustee is also responsible for handling all aspects of trust administration, including any necessary judicial or administrative proceedings.