As with wealth planning in general, many people think trusts are appropriate only for the very affluent. There is a grave misconception that estate planning is only for the uber-wealthy, upper echelon of society with private jets and luxurious yachts. However, personal trusts are a powerful planning tool that can deliver benefits for a wide range of people across the wealth spectrum. Let’s delve deeper into the topic of trusts and how they can impact your family, not only today, but generations from now.

Is a Trust Right For You?

Are trusts an appropriate planning tool for you? It depends, of course, on your unique financial situation, family needs, and goals. Trusts are growing in popularity precisely because they are so flexible and able to address a variety of objectives, from the simple to the complex. Some of the ways trusts might benefit you include:

  • Protecting and preserving your assets.
  • Customizing and controlling how your wealth is distributed.
  • Minimizing federal or state taxes, if applicable.
  • Addressing family dynamics; for example, divorce or blended families.
  • Helping a parent or other family member manage their financial affairs.

Revocable Trust vs. Irrevocable Trust

Revocable trusts allow you to retain as much control as you like over the trust and the assets you place in it. You can serve as trustee of your own revocable trust, change the trust’s terms whenever you like, add or withdraw assets at any time, and name a successor trustee to take over should you no longer wish or be able to serve as trustee due to incapacity or death.

Your ability to transfer almost any type of asset to the trust, including financial assets, real estate, and private business interests, makes them invaluable in consolidating and managing assets.

Additionally, you can also use a revocable trust to document how you want the assets in the trust to be managed, distributed, and used after you have passed away. Often, people believe a traditional last will & testament is sufficient to handle all their needs. However, it’s important to note that a will only works when you die and is the “bare minimum” in estate planning. A revocable trust provides benefits during your life as well, such as continuity in the event you become incapacitated. Assets in revocable trusts also avoid probate, enabling you to avoid the public disclosure, time, and fees associated with it. Revocable trusts allow for a seamless transition of assets to your loved ones without court intervention and lengthy wait times.

Irrevocable trusts allow you to permanently remove assets from your taxable estate and cannot be changed once executed. Irrevocable trusts can be used to provide for a spouse and children from a prior relationship, help ensure that your heirs manage and use funds wisely, and minimize federal and state wealth transfer taxes, if applicable to your estate. Remember, Texas does not have an estate or inheritance tax, but we are still subject to the Federal threshold. It is recommended to fully disclose your assets to your attorney when discussing which option is right for you. Estate plans must be customized to your individual situation and tailored to ensure that your wishes are carried out after death. There is no “one size fits all” approach in this area of the law.

Please contact the Kazi Law Firm today to learn more about your estate planning options and how to build generational wealth for your loved ones.