Properties That Are Commonly Held in Trust
Jan. 17, 2024
One of the most important decisions you'll make in your lifetime is how to manage and distribute your wealth. One tool that we often recommend to our clients is a trust.
Several types of assets are commonly included in a trust. Real estate properties are a popular choice as they can be significant in value and complicated to manage. Financial accounts, stocks, bonds, and business interests are also commonly included. Intellectual property, such as patents, copyrights, and trademarks, can be held in trust, as can high-value personal possessions like jewelry or artwork.
It's also possible to create special interest trusts with a specific purpose in mind. For example, an Education Trust Agreement can be created to save money for a child's education that can only be used for that purpose until the child is old enough to manage the funds themselves.
Creating any estate document comes with making hard and serious decisions, and trusts are no exception. You'll need to decide which beneficiaries will receive your properties and other assets and appoint a trustworthy and capable trustee or successor trustee to manage your financial matters.
What Is a Trust?
A trust is a legal entity that's created when you, the trustor, give another party, the trustee, the right to hold title to and manage your property or assets for the benefit of a third party, the beneficiary. It's similar to a person or corporation with its own separate and distinct rights.
Trusts are versatile and can be used in various ways, such as determining how your money should be handled and distributed while you're alive or after your death. They can help your estate avoid taxes and probate, protect assets from creditors, and dictate the terms of inheritance for beneficiaries.
Types of Trusts and How They're Used
There are several options available to you when it comes to trusts and how to manage your estate. The ultimate decision is up to you and your specific financial and estate planning goals. Consulting with a reputable attorney can help you make the best decisions for your unique situation. Here's an overview of some common types of trusts to consider:
Revocable trusts, also known as living trusts, are highly flexible arrangements where assets are placed into the trust during the trustor's lifetime. The trustor maintains control over these assets and can modify or revoke the trust at any point. Assets commonly held in living trusts include primary residences, bank accounts, and investment portfolios. This is because these assets benefit from avoiding the probate process, which can be time-consuming and costly.
Irrevocable trusts differ from revocable trusts in that once assets are transferred into an irrevocable trust, the trustor surrenders all control and rights to those assets. Hence, this arrangement is often used for assets that the trustor does not need to control or manage, such as life insurance policies. It's also used for assets that can yield significant estate tax benefits when removed from the trustor's taxable estate.
Assets held in charitable trusts usually include money, securities, and real estate that the trustor wishes to leave for charity, taking advantage of charitable deductions.
Special Needs Trusts
Special Needs Trusts often hold assets for a disabled beneficiary without disqualifying them from receiving government benefits. The assets generally held in Special Needs Trusts include funds for medical expenses, personal care attendants, and recreation.
Pets are a common factor in estate planning. In fact, a solid 77% of pet owners take the responsible step of designating a guardian for their beloved furry companions. Specifically, pet trusts allow you to provide for the care and maintenance of your companions after you pass away. They're especially useful if you have pets with long life expectancy or specific needs. Pet trusts can hold cash, investments, or other properties such as a pet-friendly home.
Why Establish a Trust?
There are several reasons why you might want to establish a trust. The most common reason is to avoid probate, which is the court-supervised process of winding up a deceased individual's affairs and estate. Probate can be a lengthy, time-consuming process, and property bequeathed under a living trust can transfer to beneficiaries without going through this extended process.
Additionally, court records are public, meaning anyone can look up these records and gain access to information you might prefer to keep private. A living trust makes it simpler to maintain privacy by bypassing probate entirely.
But, while a trust can help you avoid the probate process, this benefit does not extend to estate taxes. As long as you retain control of your assets, these trust assets will be considered a taxable part of your estate upon your death.
Get Trustworthy Guidance
At Iwanyshyn & Associates, we can guide you through important choices with confidence. We understand the complexities and sensitivities involved in determining how to handle your estate, and we're committed to providing the professional, informative, and empathetic support you need. Trust us with your trust needs.
We're proud to serve clients in Allison Park, Pennsylvania, and throughout Pittsburgh, Wexford, Cranberry, and Gibsonia. Reach out today to book an appointment with one of our experienced estate planning attorneys.