Trusts: With a living trust you can manage your properly while your alive and even after death.

LIVING TRUSTS

Even though trusts are not for everyone, it can be a great way to leave your assets to family, friends and organizations without going through probate. With a living trust you can manage your estate properly while your alive and even after death. A living trust is a legal arrangement where any and all assets can be transferred to a trustee. A trustee is the person you specify to manage the distribution of assets to your beneficiaries. A living trust can provide you with more privacy than a will because in most states, you don’t have to register it with the courts in probate. Another advantage of a living trust is that it allows you to hand over management of your assets to someone else if you become incapacitated.

TRUST OPTIONS

Simple Trust: Trust that is required to distribute all accounting income in the year earned; has no charitable beneficiaries; and does not distribute principal in the current year.

Complex Trust: Trust that is allowed to accumulate income, has a charitable beneficiary, or distributes principal.

TRUST TYPES

Revocable Trust
If you want to be able to modify your trust in your lifetime, you will want to start a “revocable trust”. You retain the right to withdraw assets, manage investments, and change provisions or beneficiaries as you wish.
Irrevocable Trust

The Irrevocable Living Trust is used primarily to reduce taxes.With this option, you can set up a trust for someone other than yourself, such as a child or grandchild. Doing so allows you to reduce your income taxes and the size of your taxable estate. The trust is called irrevocable because your benefits are restricted and you forfeit control of the trust assets, irrevocably.

Testamentary Trust
This trust becomes part of your will to ensure that the income paid the beneficiaries are adjusted when warranted. The trustee is authorized to use the principal for emergencies and living standard adjustments. The trustee makes investments for the family, files tax returns, keeps the books, manages rental properties, and handles all the details necessary to effectively manage the trust.

An AB Trust (marital life estate trust)
Lets a couple pass the maximum amount of assets to their beneficiaries after both spouses die.

Life Insurance Trusts
A Life Insurance Trust is set up to manage insurance benefits paid to your heirs through a trustee. While you’re living, you can maintain control of your insurance. You may borrow against your policies, change beneficiaries, or cash the policies out.

Funeral Trust
This is an arrangement between the grantor and funeral home/cemetery to allow for the prepayment of funeral expenses. The funeral trust is a “pooled income fund” set up by a funeral home/cemetery to which a person transfers property to cover future funeral and burial costs. These are grantor trusts with the grantor responsible for reporting income. The trustee may make an election on qualified pre-need funeral trusts to not be treated as a grantor trust, with the tax being paid by the trustee.

Family/exclusion trusts
Although your estate can generally pass to your spouse estate tax-free upon your death, you may choose to establish a family or exclusion trust to take advantage of the applicable exclusion amount at the first death of a spouse. This type of trust can provide a lifetime of income to the surviving spouse, with the remaining assets of the trust passing to your heirs’ estate tax-free upon the surviving spouses death.

Charitable remainder trusts
With a charitable remainder trust, you reap the benefits of reducing your taxable estate and providing income to the trust’s beneficiaries (yourself, your spouse, children, etc.). When the trust ends after a specified time or when the last beneficiary has died, the remainder of the trust passes to the qualified charity or charities you designated.

OTHER TRUSTS
These are just a few of the most common types of trusts. There are many options available to you if a trust is appropriate for you and your financial situation. Don’t try to go it alone, though. The laws on trusts (and tax implications) can be complex, and you will benefit from the assistance of a financial advisor and attorney to set up the trust and determine what’s right for you.

TRUST TIPS

Fund the trust. When you establish a living trust, you must transfer your property from your own name to the trust. This is called “funding the trust.” The trust will not take effect until the property transfer is complete. Any property that you leave in your own name passes through probate as part of your estate.
Property held as “Joint Tenancy with Rights of Survivorship” (JTWROS) automatically passes to your co-owners and doesn’t need to be placed in a trust.
Seek legal advice. Ask an attorney to advise you about establishing a living trust. In some instances, it’s appropriate to have both a trust and a will.

PROBATE

Perhaps the biggest advantage of a living trust is that it does not have to go through probate. However, there are other estate planning devices which avoid probate, such as a joint tenancy, a life insurance policy, and in-trust-for bank account, and individual retirement, pension or Keogh accounts. Find out more about probate.

WORDS TO KNOW
When you create a living trust you understand the following terms:

• The grantor is the person who creates a trust.
• The trustee is the person who manages the trust property.
• The successor trustee, who takes over after you die and distributes your assets to your beneficiaries.
• The trust beneficiaries are those who are entitled to receive the trust property at your death.
• The property means assets, both stand for the item(s) you have in your trust.

TAX INFORMATION

A well-planned trust can offer substantial tax savings to you and your family. Placing assets in a trust that provides the surviving spouse with a lifetime income void of taxation. While the current federal laws reducing estate taxes may provide some protection, ignoring this avenue for tax savings could result in unanticipated loss.
A properly prepared trust can ensure that taxes do not reduce your estate. They can even take inflation and property appreciation into account and ensure that the tax cost to your beneficiaries is nonexistent to minimal. Passing your assets directly to children and others may also eliminate additional state taxes and probate costs. Large estates and those with children from separate marriages also benefit from a well-planned trust.

WHAT NOT TO INCLUDE

Do I have to put all my assets into the trust? No! Certain types of assets can’t be put into your Trust. Your Tax-sheltered assets – your IRA, your Annuities, your 401K, for example – cannot be put into your Trust without adverse Income Tax consequences. If you transfer any of those assets to your Trust, they will become immediately taxable.

POSSIBLE DRAWBACKS

Before creating a living trust , you should understand what you’re getting into. The drawbacks of trusts are that they are initially expensive to set up, costly to maintain, and very difficult to change – more important, they also jeopardize your chances of qualifying for financial aid. There are usually on benefit restrictions and disbursement as well, learn more, talk with a financial advisor!

Check your Medicaid eligibility. You may become ineligible for Medicaid if you create a trust that names you or your spouse as a beneficiary. If you create such a trust within five years of the time you apply for Medicaid, the government assumes that your trust assets are available to pay for your nursing home care. Talk with an attorney who knows Medicaid rules before creating any trust, or giving away any property. The laws are complicated and change frequently. Talk with a financial advisor!

SCAMS

Watch out for high-pressure sales pitches for living trusts. Unscrupulous living trust salespeople charge elderly consumers thousands of dollars for what amounts to a set of pre-printed forms. Because consumers are sold this pre-printed package, the living trust may be ill-suited or even contrary to the consumers’ estate planning needs. Talk with a financial advisor!

CONTESTED

A trust can be contested in a special legal proceeding. There is no general legal rule that a living trust cannot be contested.

FINDING A FINANCIAL ADVISOR
A financial advisor can ensure you’re saving enough to meet all your immediate and retirement needs. Find out what’s best for you and your retirement goals! Learn more about the different asset allocation types, explore the areas above and fill out our online form to find a certified financial advisor in your area.