A trust is an estate planning tool that can reduce one’s estate tax obligation. As a result, some may think the increased estate tax exemption rates that went into effect with the passage of the Tax Cuts and Jobs Act (TCJA) have made the need for a trust unnecessary.
This is not so.
Although trusts continue to provide estate tax benefits, this is just one of the many advantages a creator can reap from the use of a trust. Additional benefits that remain applicable today include:
- Ease of transition in the event of incapacity. No one wants to think about the possibility of incapacitation. Although we do our best to avoid car accidents, tragic falls and other risks that could result in the inability to communicate our wishes, illness or injury can happen. In the event of incapacitation, a trust can better ensure a trusted family member or friend manage our assets until we are able to do so ourselves.
- Avoid probate. Probate is a public court proceeding used to distribute assets in the event of death. Wills go through probate. A creator can have a trust drafted to help avoid probate. This means your assets can transfer in privacy. It also reduces the risk your estate will be diminished from paying costly court expenses that come with the probate process.
These beneficial legal documents require careful drafting to meet the creator’s needs. A failure to draft the provisions of the trust as guided by state and federal law can void the benefits listed above. As such, it is wise to seek experienced legal counsel.