When many people think of estate planning, their first thought is often of a Will. However, a Will isn’t always the only, or even the best, option. Estate planning is a complicated process and it truly depends on each individual’s unique circumstances and goals. Everyone wants to make sure that their assets are transferred smoothly after their death and to successfully achieve that, there are a number of estate planning tools to consider.
First, a revocable trust could be the right estate planning tool for you if you want to make sure your estate avoids probate court after your death, allowing your asset transfer to proceed without delay. If you only set up a Will, your beneficiaries may have to deal with the probate court process, which can be lengthy and costly, leading to greater stress in an already difficult time. A Will also usually only addresses your wishes after your death and doesn’t necessarily help you should you become incapacitated. A revocable trust, on the other hand, can make great strides towards avoiding probate court and allow you to spell out your wishes clearly for possible events both before and after your death. You will be able to dictate who will manage your finances, who will oversee your assets, and who will make important decisions on your behalf should you die or become incapacitated. Everyone should consider a revocable trust as it is a powerful estate planning tool that could be right for you!
Second, a family limited partnership may be a smart choice if you qualify for estate tax exemption. A family limited partnership allows you to allocate your assets among partners in your family, providing the immediate benefit of reducing estate taxes by lowering the on paper value of your assets. You can assign ownership of an asset to a partnership and then gift interests to your family members, lowering the taxable value of your estate. This allows you to transfer the majority ownership of your assets to your children or grandchildren while still leaving you with day-to-day control. Family limited partnerships are complex and you should consult with an estate planning attorney if you believe you qualify and would like to take advantage of this estate planning tool.
Third, there is such a thing as an irrevocable trust. There are potential benefits to an irrevocable trust, depending on your particular circumstances, but there are also many negatives to be considered as well. With an irrevocable trust you can minimize the burden of estate taxes, can help those with disabilities qualify for government benefits, or you can protect your assets from lawsuits. On the other hand, you lose control of property that has been transferred into an irrevocable trust, which can lead to many negative consequences. The biggest negative of an irrevocable trust is probably that there are very specific rules you have to follow to even get the benefits and, if you’re not careful when setting it up, you may end up having your money locked up in the trust. In that case, you won’t be able to enjoy any of the original benefits that were the reason you set up the trust in the first place. So, with this in mind, it is important to discuss the benefits and consequences of an irrevocable trust with a professional before deciding that this is an estate planning tool you want to utilize.
No matter what estate planning path you would like to take, you would be best served by working with a professional, such as those at Horn & Johnsen. We can help you discuss all of your options, guide you through the process, answer your questions, and create the right estate plan for your particular situation. Contact Horn & Johnsen SC today to start your estate planning journey: https://hornjohnsen.com/contact-us/