What Are Some Common And Effective Trusts Used In Estate Planning?
If you have a child who may not be self-sufficient into adulthood, there is a special type of trust called a special needs trust. It allows the child to inherit from you without ruining their ability to receive federal aid for disability. If you leave property outright to a special needs child, then the federal government would require that child to go broke before they would requalify for federal disability benefits. A special needs trust keeps the property out of the child’s name and that property is disqualified in terms of the child’s assets. They can get the benefit of the inheritance and receive their federal money, which would act to improve their life and give them the benefit of the inheritance as opposed to making that flow to medical providers and the government before they requalify.
An asset protection trust is a different specialized type of trust. There are definitely some downsides to Asset Protection Trusts but the big upside is that if it’s appropriate for your estate, it can bulletproof those particular assets against any kind of disaster of a financial nature in the future. If set up correctly, no matter how catastrophic the potential losses are to your main estate, those protected assets are secure. The main downside to an asset protection trust is that you have to set it up and then cut the strings of control to those assets.
An ordinary family can benefit from a revocable living trust and that’s more the typical type of trust used today. There’s no loss of any property, no tax consequences, and it is very easy to manage. You don’t need any kind of special tax ID and you pretty just live your life as usual. When the time comes that you’ve passed on, your heirs can immediately inherit without court involvement. The successor trustee is your new manager. It’s very simple and much more powerful than a power of attorney, which dies with an individual. No power of attorney survives the death of a person whereas a trust does continue to live on. It can terminate immediately upon your death and distribute all the property, or it can continue to hold the property for as long as you want.
What Is Asset Protection? How Can I Protect My Estate?
The first line of defense for protecting assets isn’t really a trust. It’s taking more basic steps, like proper insurance to make sure that catastrophic events are covered adequately, given the size of your estate. Another thing that’s very powerful is to compartmentalize your estate by creating entities, like small business corporations. For example, a lot of my clients have rental properties and they’ll put those into an LLC. That isolates any liabilities or problems that happen on the rental properties from the entirety of the rest of their estate.
What Trusts Are Best For Protecting Assets While I Am Alive And After I Die?
Most people in the middle to lower income brackets really don’t want to give up the control to bulletproof an asset protection trust. After one passes away, there are some provisions that we build into every trust that can help protect. It sometimes protect beneficiaries from themselves. For example, we build in what’s called a spend thrift provision and that essentially means that the property of the trust is not the property of the beneficiary unless and until it’s time to make a distribution to them, so they can’t pledge it for a loan. They can’t get early access to it unless there are specific terms met that you’ve pre-approved during your lifetime. Creditors of the beneficiary cannot attack the trust in any way.
For more information on Common & Effective Trusts In Nevada, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (702) 829-7222 today.
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