A Lifetime Trust is an Irrevocable Trust that will pay out an inheritance to a beneficiary for the duration of his or her life. Creating individual Lifetime Trusts for your family provides a wealth of benefits.
If your children are currently minors, a Trust is a good alternative to having your child’s inheritance endure a court-supervised guardianship. Individual trusts also allows you to give your children an even split of your estate.
Many trusts end when a child reaches adulthood or a specified age such as 25 or 30. If you create a Trust that ends as some point in your child’s life, those funds will loose asset protection and may be taken for a court settlement. A Lifetime Trust offers the benefit of continued asset protect. Asset protection can keep your child’s inheritance safe from his or her creditors or a divorcing spouse.
If your beneficiaries have already reached adulthood, a lifetime Trust is still a good idea. Besides providing continued asset protection from creditors it also provides protection when an heir who is not good with money and may spend his or her inheritance too quickly. Such a Trust will also protect your child from losing all or part of his inheritance in a divorce.
Like other Irrevocable Trusts, a Lifetime Trust can pass to your heir outside of probate and without being included in your taxable estate. For estates worth more than a million dollars, estate tax reduction methods are a must. By creating trusts for each heir you will guarantee your loved ones an inheritance that will not be washed away by estate taxes.
By avoiding probate, you may save your family some of the time and cost associated with this harried process.
There are many advantages to having a Lifetime Trust. If you would like to learn more or would to set up a Lifetime Trust, schedule a visit with the living trust lawyers at Anderson, Dorn & Rader.
If you have retirement accounts, you understand the importance of having enough funds to cover your retirement expenses. So, what if you pass away with funds still in these accounts? When you die, your family or other loved ones may inherit your retirement accounts.
First, make a list of all of your retirement funds. Include your 401k, pension plan and IRAs. If you were self-employed, don’t forget to list your self-employed 401K, Keogh plan or other account. Next, include details for each account: statement locations, account numbers, financial institutions, account managers, and a description of benefits you are currently receiving.
You should also include information about what you have paid into social security. Some of your beneficiaries, such as children under eighteen or a spouse, may be able to collect on your social security record.
Retirement accounts allow you to name a beneficiary to receive those funds after you pass away. If you have a 401K or work pension plan, or you live a community property state, you may be required to designate your spouse unless he or she signs off on a different beneficiary.
By choosing a beneficiary, your account can pass to your heir outside of probate. Make sure to update account beneficiaries when they change.
It is not a good idea to name your Revocable Living Trust as the beneficiary of a retirement account, as it will limit the access your heirs have to those funds. Since your account can already avoid probate if you have designated a beneficiary, you don’t need a Living Trust for this.
If you prefer a trust to provide protection against a beneficiary's divorce or other creditors, or you have beneficiaries who are young or exhibit spendthrift behavior, you may wish to consider a Retirement Plan Trust. This is a trust specifically designed to meet the requirements of the tax laws to allow you to protect the death benefits of these accounts and to "stretch out" their tax benefits over the life expectancies of your beneficiaries. This allows for maximum protection of your retirement accounts after your death and provides for the greatest overall income tax deferral on these accounts.
A pot trust (also referred to as family trust) is a single trust for all of the children in the family that is used in the event that both parents die before the children reach a designated age of maturity. It offers some unique pros and cons for your beneficiaries.
An advantage to having a pot trust is that the trustee may be given the flexibility to spend the funds in any way he or she deems fit. That means that little Jimmy could have tuition paid to attend a trade school while Mary's tuition at an accredited university is paid if that’s what the trustee determines is in their best interests. However, if you gave a trustee broad discretion to make these types of decisions, you should be assured that your trustee is someone in whom you can place your confidence to make the decisions as you would desire.
Another consideration is that the trust is set up to operate until the youngest of the children reaches the designated age. Any funds then remaining in the trust would be disbursed equally to all the children. But if there’s a large gap in ages between your children, the older children may be waiting a significant time to receive their portion of the inheritance.
Of course a pot trust is only one toll of many to provide an inheritance for your children after you’re gone. To learn more about inheritance estate planning, get in touch with Anderson, Dorn & Rader.
