With the new school year approaching and your child heading off to college, you've likely…
The legal entities we know as trusts have been around since the Crusades were active across Europe in the Middle Ages. Back then, the intent of trusts was limited to managing the salary and assets of English knights who left their homes to fight for the crown and church. These days, the common law system of the United States has progressed to a point when trusts can be structured in dozens of ways to serve highly specific purposes. With so many trusts, it would be hard to win a contest to name them all.
There has always been an estate planning angle related to trusts. The knights who insisted upon these legal arrangements knew that there was a good chance they would not return alive from the Crusades. With a trust in place, they did not have to worry about their wills being contested or sabotaged by corrupt members of the royal court. Over time, family and property dynamics became more complex and sophisticated, which resulted in the creation of numerous trust structures to serve various purposes.
There is a good chance you are familiar with, or at least have heard about, revocable trusts. These are traditional legal entities that are often drafted and executed to avoid having to go through the probate process; however, they can also serve to manage assets before we pass away. When you ask, “What is a trust?” The answers you will get will likely be based on the revocable trust structure because it is so common.
Trusts can also be used for asset protection purposes, and this is when irrevocable trusts come into play. The goal is to take advantage of property and privacy laws in certain jurisdictions to make it difficult for creditors, frivolous plaintiffs, gold diggers, bickering relatives, and others from trying to claw at the assets or the estate.
Trust funds are more closely related to estate planning, but they are not a specific kind; they can be specifically constructed to benefit minors, shield wealthy families from high estate taxation, or prevent heirs from irresponsibly burning through inheritances too quickly.
Speaking of estate taxation and how to mitigate it, there are trusts that take Individual Retirement Accounts into consideration, and they are recognized by the Internal Revenue Service as an efficient legal method that can help with retirement planning and financial management.
Figuring out the trust structure that is right for you and your family is something an experienced estate planning attorney can certainly help with. Numerous factors will determine how the trust will be structured and how it will operate. In some special cases, the trust may need to be formed and registered in a different state or even overseas; for example, Nevada irrevocable trusts are known to provide formidable asset protection, but they often need to be carefully structured with trustee panels and trust protectors.
If you have questions about the kind of trust that is right for your estate planning or asset protection needs, please contact our office today so that we can discuss your options.
Contact the Estate Planning Attorneys at the Law Firm of Christopher W. Dumm