For married couples creating an estate plan, a trust may be a better option than a will. Trusts offer protection of assets during the couple’s lifetime as well as after the death of one of both spouses. Many kinds of trusts offer many kinds of protection. Why should married couples consider a trust?
Reason #1—Privacy and efficiency.
Wills are filed with the court and, thus, become public record and subject to court administration. Trust agreements are private and are administered by a trustee. Privacy helps avoid intrusive inquiries by scammers or greedy would-be heirs. Administration by a trustee avoids court fees, processes, and waiting periods that can delay the distribution of assets to beneficiaries, funding for property maintenance, or payments to a dependent. A trustee can distribute trust assets immediately according to the trust’s terms without court supervision.
Reason #2—Reduced estate taxes.
A revocable trust that funds a “bypass” or “A/B” trust upon one spouse’s death up to the amount of the deceased spouse’s federal and/or state estate tax exclusion will let those assets grow free from further estate taxation in the “A” trust. In the meantime, the surviving spouse can access the rest of the couple’s assets in the revocable “B” trust without incurring estate tax. When the second spouse dies, the property in the “A” trust can go tax-free to the couple’s beneficiaries.
Reason #3—Protection from creditors, including a divorcing spouse.
If your beneficiaries have issues with creditors or are contemplating divorce, trust assets can be withheld from distribution for a period of time.
Reason #4—Protection of family assets from remarriage.
If a surviving spouse remarries then dies, the new spouse could make a claim against both spouses’ assets. This could eliminate or severely reduce assets intended for the couple’s children. There are several possibilities where trusts can prevent this from happening. The options are based on the issues in your situation.
If you have specific concerns about a beneficiary’s grades, credit history, use of illegal substances, or you simply want to specify the age, or ages, you want a child to inherit, a trust is right for you.
Is a Trust Right for You?
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