It's a common misconception that all older adults have wills and trusts. In fact, a Caring survey found that less than half of those polled had any type of will or trust.
Estate management is an absolute must, especially for those with assets and beneficiaries they're looking to care for. Although any adult can create a trust agreement with their attorney, it's especially important for seniors to have these legal documents available.
However, trusts in estate planning can be slightly daunting, with questions arising about this type of senior financial planning. This essential guide explains everything you need to know about trusts.
Trusts, also known as trust funds, are an essential part of estate planning. The person who creates the trust -- the grantor -- creates a plan that keeps their beneficiary financially secure. Trusts hold any of the following:
No matter what type of assets you have, a trust can hold these accounts and safely distribute them down the road, at the time outlined in its pages.
Trusts are ideal because they clearly define the terms in which you wish your assets to be distributed. This includes to whom and when. For example, you may want your beneficiaries to receive their funds at specified ages.
Trusts also avoid probate court. This is helpful because they avoid the following:
By creating a trust, you can save your loved ones time and money.
Anyone with beneficiates to care for would benefit from a trust, along with those who have specific requests about their assets. Anyone concerned about health issues, including dementia, should put their assets in a trust. This way, trustees can manage their assets while adhering to the wishes outlined in the trust.
In certain instances, a person can name multiple trustees. This means that two trustees would need to agree on the terms of the trust, removing any one person from having autonomy over the funds. This is sometimes done as a precautionary measure, further securing the trust's assets and any subsequent beneficiaries.
When choosing which type of trust you'll need, it's important to first familiarize yourself with each option. Here are some common trusts that older adults or seniors in assisted living may want to choose from.
When someone creates a revocable trust, it means they can change the terms of the trust at any point in time. These trusts are also called revocable living trusts.
Your assets are typically transferred to beneficiaries upon your passing. The majority of trusts can be made as revocable. These trusts work to avoid probate.
The main downside is that any assets in these trusts are personal assets. This means that creditors can access these trusts after death to pay off any loans. Depending on how much money is in your trust, your beneficiary may have to pay taxes.
Irrevocable trusts differ from revocable trusts in that you can't change them. You also can't terminate these trusts. These trusts are usually created when planning an estate.
These trusts have special benefits, including protection from lawsuits and creditors. When a grantor adds assets to an irrevocable living trust, they're not considered personal property, so the IRS can't include them when determining an estate's overall value.
If you're unsure about a revocable vs irrevocable trust, consult a professional for guidance about asset protection with trusts. It's important to understand that revocable trusts turn into irrevocable trusts after a person passes away.
Seniors concerned about creditors can create asset protection trusts. This is especially true for anyone worried about filing for bankruptcy.
Assets in an asset protection trust are protected from bankruptcy court. Just keep in mind that these trusts may be on the pricier side but provide a significant amount of security to the grantor.
Depending on the type of trust created, there may be protection from estate tax upon a person's passing. This helps beneficiaries in the long run.
It's also possible for the trust grantor to add exclusion gifts to their irrevocable trusts every year. They can do so without having to pay an extra gift tax.
In addition to financial protection, trusts allow you to customize your estate plan as changes arise. This might mean a change in age attainment for beneficiaries or other guidelines on the distribution of your assets.
One of the most important aspects of a trust agreement is the protection it offers your loved ones, ensuring their financial well-being.
If your trust has a significant amount of assets contained within it, you most likely don't want this becoming public knowledge. Wills are just that -- subject to public information -- while trusts are private, which means your loved one's inheritance stays personal.
Trusts are also excellent for anyone with special needs minor children, including grandchildren. These trust agreements ensure they're financially taken care of in the event of the grantor's passing.
Additionally, trusts can be created and established within a matter of days, making them a worthwhile legal document you can easily create to care for your loved ones in your absence.
Seniors who want to learn more about estate planning can look for free local community events, especially those at senior centers, that discuss estate planning.
Estate management keeps you and your loved one safe and protected. These documents can easily be drafted by your attorney and are an essential part of effective legacy planning, ensuring your assets are where they belong.
Seniors should have wills and trusts in order, as this can offer them peace of mind in their golden years, protecting their loved ones. By handling the legal aspects of retirement, they can enjoy the finer things in life, such as a robust activity calendar, community outings, and gatherings with friends and family.
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