Many people keep assets and invest in properties so they will have something to leave their families in case anything happens to them. Whether it is a house or a business, individuals consider all their assets when estate planning. And in estate planning, one of the tools to consider putting assets in is a trust.
But what happens if you decide to include your Arkansas house or any property for that matter in a trust?
Three typical benefits
When considering estate planning tools, individuals usually look into the benefits first. Creating a trust for one’s assets and properties may result to:
- Avoiding the probate process: Unlike wills which become public records, trusts are private instruments that do not need to go through probate for verification and distribution. Instead, the trustee will be the one to execute the terms of distribution, which is usually faster and may cost less compared to probate proceedings.
- Receiving creditor protection and tax benefits: In an irrevocable trust, the trustor transfers their assets to the trust, making those properties no longer part of the trustor’s estate. If the trust meets certain conditions, the trust assets can be free from federal taxes and creditor claims. One should note, however, that Arkansas federal taxes only apply to estates worth approximately $12 million as of 2022.
- Keeping away from conservatorship in case of incapacity or disability: If something happens to the trustor, the trustee can manage their estate and make important decisions based on the instructions on the trust. This way, the trustee’s wishes is still maintained and their assets remain protected.
It can be disadvantageous too
Depending on the trustor’s priorities, trusts can be disadvantageous to them. For instance, revocable trusts do not offer creditor and estate tax protection, while irrevocable trusts can no longer be subject to modifications.
Each type of trust has different benefits and disadvantages. This is why it is important for one to carefully review estate planning tools and choose those that will be most beneficial to them.