Trusts aren’t just for the wealthy
The majority of the population may never have considered it, but a trust is a great option for a lot more people than the top 1%.
You might be able to get by with a simple will but having a smaller estate shouldn’t rule trusts out completely. Here are five reasons to consider a trust.
1. Reduce estate tax
By lowering your estate tax, you may increase the amount of funds available for your beneficiaries.
Federal Tax: In 2020, the first $11.58 million is exempt from federal estate taxes (per person)—which may make you think it’s not necessary to have a trust. The federal exemption is scheduled to drop back down to $5 million in 2026 thus a trust could reduce federal taxes on estates greater than this figure.
State Tax: If you’re a Massachusetts resident, it’s prudent to consider putting some of your assets into a trust. Tax rates vary by state—Massachusetts has a $1 million estate tax exemption.
Value of Your Estate: With inflation and the rising cost of housing, it’s easier than ever to hit the $1 million ceiling when you consider what becomes part of your estate. It can include the fair market value of your home, life insurance, retirement accounts, investments and bank accounts.
2. Provide for your own care
Accidents and illnesses happen far more often than we’d like to think and leaving bills unpaid could be disastrous by the time you recover. In the event that you’re incapacitated, a trust will allow your successor trustee to pay your bills from the trust; without a visit to the probate court.
3. Avoid probate
Avoiding probate saves time and money—it means your loved ones won’t have to go to court in order to manage your care, finances or authenticate the will. As long as the trust is created and funded during your lifetime, they’ll reap this benefit.
4. Gifts and limits for your beneficiaries
When we think of conditions on trusts, we think of popular reasons like saving money for your minor children until they’re old enough to manage it themselves. But you can also place limits on your spouse if you’re concerned your spouse will blow through the trust and leave your children with nothing. You can appoint a permanent trustee to oversee how your beneficiary spends the funds. Furthermore, you can make lifetime gifts to your children through trusts, which will reduce your tax liability.
5. Protection from creditors and divorce
Trusts can shield your assets from liability to others. For example, when you start a business, depending on the type, you can be held personally liable for the business’ debts and lawsuits. Having a trust can keep your beneficiary’s money safe from liability. Similarly, trusts also protect beneficiaries in the event of a divorce.
Ultimately, whether a trust is right for you will depend on your individual situation—which is why we always recommend consulting with an estate planning professional. Whether you’re wealthy or not, a trust can be a great option for protecting yourself and your family.
Plan Ahead with a Trust
To discuss whether a trust may be right for you, the estate planners at Baker Law Group would be pleased to assist. We offer a complimentary consultation.
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