Establishing a trust can pay off big in estate planning

On Behalf of | Dec 23, 2019 | Estate Planning |

You can establish a trust to handle your money for you, helping you meet qualifying limits and avoiding penalties after you pass. The two basic types of trusts you’re likely to encounter in your planning are revocable and irrevocable trusts, but one may offer a lot more help than the other.

The process and guidelines for each are a little different, but those minor details could make a mile of disparity. A revocable trust typically allows you to retain access to your money, which generally means that the funds therein could still count as assets under your control. An irrevocable trust, on the other hand, closes around your property once you create it. For this reason, the funds are generally considered to not be under your control, which can provide an array of benefits as soon as you create one.

A trusting process

The perks of an irrevocable trust can show themselves all across your estate planning:

  • Estate tax: Even if the limits for estate tax seem out of your reach, you might be closer than you think after factoring real estate, investments and insurance policies. Putting the funds into a trust could take them out of the equation when determining your assets.
  • Government assistance: Programs like Medicaid have strict confines when it comes to asset and income levels. Surrendering your money to a trust that pays back dividends over time could be a way to continue to benefit while meeting Medicaid demands.
  • Asset protection: One of the steps following your passing will be to settle those that have claims against your estate. Creditors will generally only have a right to assets under your estate’s control, which means funds sheltered in a trust could be free from their grasp. The money could instead head to your family outside of the probate process.

Understanding what an irrevocable trust can do for you is generally the first step to keeping your assets working for you instead of counting against you.