Anyone with substantial property must consider how their assets such as home, brokerage account, retirement plan or savings account will be distributed after their death. Heirs who squander their inheritance or court battles are more likely without solid estate planning.
Assets may be protected for future generations with the creation of valid trusts. These can be created with several protections such specifying that assets can pass to beneficiaries when they reach a certain age or restricting the use of money to certain necessities such as education or medical expenses.
With a trust, heirs may have access to money that is out of the reach of creditors. If the heir is divorcing, a trust may keep the money from being divided as marital property.
A person who owns a 401(k) or an individual retirement account can transfer the funds to an IRA trust. Like a regular trust, assets in an IRA trust receive bankruptcy protection. A trustee manages these trusts which adds financial protection for a spendthrift heir or helps provide for the care of children with special needs.
Trusts also have tax advantages. The current federal tax exemption for trusts is $5.45 million for individuals and $10.9 million for couples. Current legislation may even double these exemptions.
Trusts can also keep estates out of the time-consuming probate court process and even related litigation. These protections stop descendants from litigating disputes over wills, fighting a will challenge, or just fighting among themselves.
A recent national survey revealed that people are not protecting themselves, their families and their descendants. Only 40 percent of respondents had a will while only 17 percent had a trust. An attorney can help individuals protect these assets and assure their family’s financial stability by creating trusts and engaging in other estate planning that complies with Michigan law.
Source: CNBC, “How to start thinking about an estate plan,” By Sharon Epperson and Jessica Dickler, Nov. 21, 2017