There are nearly 8 million Americans who can be called millionaires (excluding the value of their primary residences), according to the Journal of Financial Planning.
That’s a fairly small number, considering that nearly 300 million people live in the United States.
It’s a common misperception that only the wealthy can benefit from a trust. Most people don’t expect to be liable for estate taxes, and thus assume that a will is sufficient. Although some trusts can be set up to help manage estate taxes, trusts have many more uses than you might imagine.
Even if you don’t expect to be liable for estate taxes, you still need to arrange for the transfer of your assets to your heirs. A properly structured living trust may facilitate this process.
Pass on Probate
When someone dies, his or her estate becomes subject to probate, an often costly and time-consuming legal process that typically takes place when an individual leaves titled property behind. An estate is subject to probate regardless of whether the individual left behind a valid will.
By contrast, the assets held in a trust avoid probate. Instead, after the trust grantor dies, the designated trustee distributes the trust assets directly to the beneficiaries in a private and timely manner. Although there are fees and expenses associated with setting up a trust, they have the potential to offset or even reduce probate fees on the rest of the estate.
The use of trusts can involve a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning professional before implementing such strategies.
Preside and Plan
The grantor of a properly structured living trust can maintain full control over the assets by naming himself or herself as the trustee. Using this strategy, the grantor/trustee can sell assets or even give them away.
A trust can be used to coordinate an entire estate plan, which may help reduce confusion and avoid property going to beneficiaries in disproportionate amounts. Families who own property in more than one state may find that a living trust is especially useful, because probate would likely be required in each state in which property is owned.
Living trusts are not just for the wealthy, but they aren’t suitable for everyone. A review of your individual circumstances can help determine whether you could benefit from a living trust.