Trusts are a common estate planning tool to protect assets and to control the distribution of your estate. There are many different types of trusts and each has its unique set of pros and cons. Today we are going to discuss the key differences between a Family Trust and a Living Trust.
Knowledge is key to proper Estate Planning and having sold advice is one of the smartest moves you can make to protect your assets. Let us help you and your family with your Estate Planning needs. Call the Law offices of Paul F. Sherman (503) 223-8441 or Contact Us for a free estate planning consultation.
What are the Benefits of Placing Assets in a Trust?
Assets placed in a well drafted trust are protected from the Probate Court. Trusts are essential to avoiding the exorbitant cost of probate court and can reduce estate and gift taxes. A well drafted trust will ensure your family’s privacy and avoid the publicity of probate court.
Trusts can also provide better protection of your assets against creditors and lawsuits. A properly drafted trust will allow you to distribute your estate to your intended beneficiaries in any manner you see fit. Trusts can also be used to place conditions on how and when the assets of your estate are distributed when you die.
What Is a Family Trust?
A Family Trust is an estate planning device that is often used to create a financial legacy for your family. Family trusts are a type of living trust. The trust can be “revocable” or “irrevocable” depending on your needs and the estate planning strategy that works best for you and your family.
Family Trusts are used to manage your assets on behalf of your beneficiaries. Family trusts are flexible and the conditions for your planned distributions can be based on any number of goals or milestones. For instance, your child can receive a set amount on graduating from high school or college, getting married, having children or on a specific age.
Family trusts are also used to provide for a child or family member who has special needs. Family trust assets are excluded from Medicaid eligibility guidelines which is an additional benefit for many families. This allows a family member to get the care they need without having to deplete the trust assets.
What Is a Living Trust?
Living trusts are an estate planning tool which can eliminate the requirement of probate when you die. Living trusts save money by avoiding expensive and time consuming probate court costs and expenses. Accounting to the probate court can be literally be an ordeal and cost thousands of dollars. Family trusts can also be used to reduce estate and gift taxes. Again, the trust can be either revocable or irrevocable depending on your needs.
Once the living trusted is established, you will transfer your assets into the trust to be distributed according to your wishes when you die. The majority of our clients retain control of their assets during their lifetime. The trust will then name a successor to manage the trust and distribute your assets to the named beneficiaries.
A living trust can be used to leave your estate to anyone you choose. The potential beneficiaries include family members, friends, charities, schools, foundations, pets and anyone else you would like to share in your estate. A living trust can also be used to specifically deny an inheritance to anyone.
A well drafted trust avoids family conflict by stating your wishes in clear terms and setting forth your specific intent for the distribution of your estate. A living trust can virtually eliminate the ability to “contest’ the estate plan you have made.
What are the Key Differences Between Family Trusts and Living Trusts
Family trusts and Living trusts are both valuable estate planning tools and offer protection and benefits for your assets. Some of the key differences between them include:
- Living trusts allow you to decide how assets are handled before and after death. The grantor of a living trust is usually the trustee for the estate. As such, you as the grantor will control the assets that are held in trust for the rest of your life. When you as the grantor die your assets are distributed according to you written wishes in the trust agreement
- Family trusts are designed to continue beyond the grantor’s life. A family trust has an extended lifespan that allows the trust to distribute assets based on designated milestones (ie., marriage, having children). Family trusts are used to maintain the family legacy. A family trust can also fund the special needs of a loved one for the remainder of their life.
- Living trusts expand the potential beneficiaries of the estate. A living trust can distribute assets to anyone who is named as a beneficiary when you die. The beneficiaries can include family, friends, charities, alma maters, pets and others. On the other hand, family trusts are designed to benefit only the family members of the grantor.
You Should Have a Well Drafted Trust for Your Estate
A well drafted trust is a good choice for almost every estate. A trust allows you to avoid family conflict by having a clear plan for the distribution of your estate. It allows you to distribute your hard earned money in the manner you choose. A well drafted trust allows you to eliminate probate court and provides for a timely disposition of your assets.
A well drafted trust allows you to control your estate “from the grave” by establishing clear rules for how money is distributed after your death. Trusts are an important tool for the care of family members with “special needs” and allow you to continue to care for someone for the rest of their life. A well drafted trust allows you to maintain control over the distribution of your estate.
We Can Help You and Your Family With Your Estate Planning Needs
Having a well drafted a trust is a recommended strategy to protect your assets and control the distribution of your estate. We offer competitive low cost flat fee estate plans to our clients, including a simple Will, Durable Power of Attorney and an Advanced Medical Directive. We also offer affordable complex estate planning and litigation support.
We know you have questions and we have answers. If you would like more information on drafting a trust or estate planning call the Law Offices of Paul F. Sherman at (503) 223-8441 or Contact Us for a free estate planning consultation.