Planning for the future is important regardless of your age or wealth. One of the estate planning tools you can use to protect your assets and pass on property to your heirs and beneficiaries as you see fit is a trust.
Trusts can be useful tools, and they can offer asset protection and stipulations regarding inheritances that go beyond what a will can provide. However, trusts are usually complex to create, and you need an experienced estate planning attorney to help you with the process.
What Is a Trust?
A trust is a legal arrangement that protects any assets in the trust, and through it, you can provide very specific instructions for how, when, and by what means you want the funds to be distributed to your chosen beneficiaries.
Iowa allows for living trusts that you can create while you are alive, as well as testamentary trusts that become active after your death. You have several different types of trusts you can create. The most common include:
- Revocable – These types of trusts can be altered or terminated as needed while you are alive. The grantor, or the one creating the trust, can act as the trustee for tax purposes during their lives and establish a successor trustee to take over after their passing.
- Irrevocable – Conversely, irrevocable trusts do not allow the grantor to make changes, and the instrument must name a trustee who is not the grantor. The grantor must give up control of the assets in the trust, and they will not be included as part of the grantor’s taxable income.
- Special needs trusts – If you want to provide for a disabled family member, you can create a special needs trust to help them financially without the risk that they would lose their federal and state disability benefits.
- Charitable remainder trusts – You can use a trust to provide donations to specific charities or non-profit organizations.
You can even create an honorary trust to specify care for your pets upon your passing or incapacitation, and you can use it to fund the costs of caring for your animals.
What Trusts Can Do
Many people don’t fully understand what a trust is or how it works, and you should take into account several factors as you make your decisions.
- A trust is not just for the rich, and can help protect assets of any size. When you think of trusts, you may imagine a child who has received a vast fortune from their parents or grandparents, and you may feel you have to have a lot of money and assets to justify creating a trust. While trusts are typically more expensive to create than wills, you do not have to have millions of dollars in the bank to fund the trust once it’s created. You may also fund the trust with assets other than money, and the attorneys at Arenson Law Group, PC can explain what you can and cannot include in your trust.
- A trust keeps your matters private. Unlike a will, which must be recorded in probate court and becomes a matter of public record, trusts do not have a requirement for making their terms public, even following your death. This allows you to place specific provisions in your trust that may expose sensitive information you do not want others to see.
- Trusts allow you to make specific requirements for inheritances. In a will, you can pass on money and other valuable assets to your heirs, and you can exclude heirs from receiving an inheritance. However, you usually cannot place exceptions or conditions in the will regarding when or by what means a beneficiary can receive their inheritance. For instance, you may want to ensure the beneficiary graduates from college, has a steady job, or has completed alcohol or drug abuse treatment before receiving their inheritance, and you can add those stipulations to your trust.
- A trust can protect your assets from creditors. When you die, your estate will have to be settled, and that includes paying off all your creditors before beneficiaries can receive their inheritances. Certain trusts, particularly irrevocable trusts, can shield your assets and protect them from claims made by creditors.
A powerful tool, a trust can provide specific details regarding your final wishes and protect your assets from creditors. However, they are complex legal arrangements that require a complete understanding of estate laws in order to use them to your best advantage.
Contact Us for Help
The Cedar Rapids estate planning attorneys at Arenson Law Group, PC have helped hundreds of clients across Iowa establish and enforce their trusts. You can contact us at (319) 363-8199 to request a confidential consultation so we can help you with yours, too.