6 Assets a Trust Can Hold That a Will Can’t
Many people are familiar with the idea of a last will and testament, but not everyone is familiar with trusts. For the sake of comparison, a will is a legal document that outlines how a person’s assets should be distributed after their death. A trust is similar in that it distributes assets after death, but it holds onto them beforehand and can also distribute assets while every party is alive. This range of capabilities makes trusts another important tool in estate planning.
But when we already have wills, why do we need trusts? Due to the nature of wills, they cannot pass down every estate asset that you would want to. Because of this, there are some situations where you would want a trust instead. The estate planning attorneys at The Law Offices of Diron Rutty, LLC can explain.
What are Trusts?
It would be most accurate to say that trusts are legal arrangements where assets are held by a trustee for the benefit of a beneficiary. This can provide many benefits, such as avoiding probate and minimizing estate taxes.
Understanding Estate Planning Assets
Before delving into what a trust can hold that a will cannot, it’s important to understand what qualifies as an estate planning asset. These assets include:
- Real estate
- Bank accounts
- Life insurance policies
- Personal property such as jewelry or artwork
These are all assets that can be passed on to beneficiaries after a person’s death.
What Can a Trust Hold That a Will Cannot?
One of the main advantages of using a trust is that it can hold assets that wills cannot. This is because trusts are treated as separate legal entities so they are not subject to probate court. As a result, any assets held in a trust will bypass the probate process and can be distributed immediately to beneficiaries. Some examples of assets that can be held in a trust include:
- Life insurance policies: Rather than designating a beneficiary on a life insurance policy, the policy itself can be transferred into a trust. This gives you more control over how the policy’s proceeds are distributed. It can also provide tax benefits.
- Business interests: If a person owns a business, they may want to transfer ownership of the business into a trust. This ensures that the business can continue to operate smoothly after the owner’s death since it can’t be passed down through a will.
- Special needs funds: A trust can be used to hold assets for the benefit of a loved one with special needs. This ensures that the assets are managed and distributed in a way that will not affect their loved one’s eligibility for government benefits.
- Property in multiple states: If a person owns property in different states, it can be beneficial to transfer ownership into a trust. This avoids the need for separate probate processes in each state and can save time and money.
- Retirement Accounts: Certain types of retirement accounts, such as individual retirement accounts (IRAs), can be placed in a trust. This can provide more control over the distribution of assets after the account holder’s death.
- Jointly Owned Property: A property owned jointly with rights of survivorship cannot be willed to someone else. However, this property could potentially be placed in a trust.
These are not the only assets that a trust can hold. Some assets can be transferred down through a will, but may be better to utilize a trust for. We can figure out what will work best for you during a consultation.
Why Use a Trust?
Using a trust to hold certain assets instead of a will can provide numerous benefits. These include:
- Avoiding probate: As mentioned earlier, assets held in a trust do not go through the probate process. This means that they can be distributed immediately and privately to beneficiaries.
- Minimizing estate taxes: Trusts can be structured in a way that minimizes estate taxes. This can save beneficiaries a significant amount of money.
- Maintaining privacy: Unlike wills, trusts are not subject to public records. This means that the details of a person’s assets and beneficiaries will remain private.
Contact The Law Offices of Diron Rutty, LLC for Help Creating a Trust
While wills are important and you should never be without one, you can’t always rely on wills alone. Trusts offer additional benefits that wills cannot. So, it’s a good idea to use a will and a trust to ensure that all of your assets are protected and distributed according to your wishes. Contact The Law Offices of Diron Rutty, LLC today for help creating a trust as part of your comprehensive estate plan.