There are multiple different types of trusts used in the field of estate planning, and they do not all accomplish the same objectives. Let’s look at some of the benefits that you can gain if you utilize the right type of trust.
Asset protection is a concern for many people. You may be concerned about your own personal resources while you are alive, and you may also want to protect assets that you are leaving to loved ones. There are trusts that can be used for asset protection purposes.
Estate Tax Efficiency
When you are planning your estate, you should inventory your resources to evaluate your estate tax exposure. This tax can take a heavy toll on your financial legacy, because it carries a 40 percent maximum rate.
You can transfer unlimited assets to your spouse free of taxation, but transfers to others are potentially taxable. In 2015, there is a $5.43 million federal estate tax exclusion. This is the amount that you can transfer before the estate tax would become applicable.
If you are exposed to the estate tax, there are trusts that can be used to ease the burden.
Probate is the legal process of estate administration. If you use a last will to record your final wishes, it would be admitted to probate after you die. No inheritances would be distributed while the probate process was underway, and it will typically take close to a year, even if there are no particular complications.
You could use a trust instead of a last will as your vehicle of asset transfer if you want to facilitate asset distributions outside of the process of probate.
Medi-Cal is California’s version of the Medicaid program. This program will pay for long-term care, and most seniors will need living assistance eventually. Medicare does not pay for custodial care, so Medi-Cal is the solution for many seniors who need help with their activities of daily living.
Since Medi-Cal is a need-based program, there is a limit on countable assets. This limit is just $2000 for an individual. To qualify for Medi-Cal to pay for long-term care, you could potentially convey assets into a Medi-Cal trust.
We have looked at a handful of the different types of circumstances that could call for the creation of a trust of some kind. However, there are other scenarios that can be addressed through the utilization of a trust.
Schedule a Consultation
If you have questions about trusts, we can provide you with answers. Our firm offers consultations, and we give each of our clients personalized attention, because there is no one-size-fits-all estate plan.
To set up an appointment, send us a message through this page: Sacramento CA Estate Planning Attorneys.
Latest posts by Timothy P. Murphy (see all)
- Use Trust Protectors for Added Protection and Flexibility - October 13, 2019
- How Will You Obtain the Care You Need? - October 11, 2019
- Income Tax Basis in Estate Planning - October 9, 2019