What Can You Do With A Trust?
In some ways, all trusts are alike. Much like a business, a trust has its own tax ID number, and its property legally belongs to it instead of to you; in this regard, it is similar to a business entity. The person who sets up the trust, funds it, and gives instructions about how to use its assets is the grantor. The one who has the authority to dispense money from the trust and make other financial transactions on its behalf is the trustee. The recipients of money from the trust are the beneficiaries. It is possible to be the trustee of your own trust; with a living trust, you can also be the beneficiary of your own trust. Beyond that, every trust is unique. Trusts vary according to when and how they spend their money and how they earn income, if any. A Tampa estate planning lawyer can help you make wise decisions about establishing a trust.
Providing for Family Members Rather Than Giving Them a Lump Sum and Leaving Them to Their Own Devices
Most people choose to leave most or all of their property to close family members. In some cases, though, a lump sum inheritance would do more harm than good. These are some scenarios where it would be more beneficial if the trustee paid out the inheritance to the beneficiaries in small installments or if the trust paid the beneficiary’s expenses without the beneficiary directly controlling the money:
- The grantor’s wife is in poor health and lives in a nursing home. He worries that, if his estate gave her the inheritance in a lump sum, his stepchildren would take the money for themselves instead of using it for their mother’s care.
- The grantor’s children are minors. He wants to name his lawyer as the trustee of their trust and have it pay out the money as if it were child support payments, so his ex-wife cannot spend the money on herself and there is some money left for the children to spend when they grow up.
- The grantor’s son suffers from substance abuse disorder. The grantor worries that a lump sum inheritance would make it harder instead of easier for him to stay sober. She instructs the trustee to pay him the inheritance in installments and to use the trust money to pay for his addiction treatment if he relapses.
Protecting Yourself From Tax Liability
Assets that belong to your trust don’t belong to you, from the perspective of the IRS. If your living trust owns some of your property, this can lower your tax burden.
Protecting Your Assets During the Probate of Your Estate
Creditors can make claims on your estate for repayment of your debts. It is much harder for them to seek repayment from your trust, since the money belongs to the trust instead of to you.
Contact David Toback With Questions About Setting Up a Trust
A Central Florida estate planning lawyer can help you dispense money responsibly to your family through a trust. Contact David Toback in Tampa, Florida to set up a consultation.