A trust is a useful aspect of many estate plans. While they have some similarities with a last will and testament, they are distinctly different documents. Understanding the benefits of a trust can help you determine if it is useful to your estate planning goals. A Kansas City estate planning attorney can help you further understand the advantages and disadvantages of a trust and how it could support your specific estate needs.
A trust can be either revocable or irrevocable. If you create a revocable trust, you can name yourself as the trustee, giving you control over the assets during your life. After death, the trust automatically becomes irrevocable and cannot be altered. Your estate plan can be made of one or multiple of either of these types of trusts, depending on your needs.
Creating a Trust
When you establish a trust, you are creating a legal entity into which you place assets. The named trustee is in charge of the preservation and care of those assets. If you are the trustee, you should name a successor trustee who can replace you after your death. When your estate is distributed after your death, the administration is the trustee’s responsibility.
Since a trust is a legal entity that is always under the control of the trustee, its contents are private and the ownership of its assets never passes to state jurisdiction. This arrangement has several unique benefits.
The Benefits of a Trust in Kansas City, MO
There are many benefits to establishing a trust, including:
- Avoiding Probate: Since a trust does not enter state jurisdiction, the assets do not have to go through the probate process. Probate is how the state inventories and settles your estate. It can be a long and costly process for loved ones, and it can prevent them from accessing their inheritance for some time.
A trust allows you to avoid this process and provide instructions for paying creditor claims and the distribution of your assets outside of court.
- Protecting Privacy: By avoiding probate, you also protect the privacy of your beneficiaries and your estate. Probate is a public record, including the inventoried assets and who they pass to. When you establish a trust, the process is private.
- Limiting Disputes: A trust mitigates the likelihood of will contests. Contests are often part of the probate process, so avoiding the process can limit the risk of contests. A trust also enables you to provide clear instructions that are enforced by provisions in your will, limiting the likelihood of any successful contests.
- Increased Control and Flexibility: You can determine when and how assets in a trust are distributed and can control how assets are used by their beneficiaries. This gives you significantly more control over your estate. If you have minor children, the trust can hold the assets that pass to them until they are of age. A trustee has a fiduciary duty to your children’s interests.Without a trust, the court will place a guardian in charge of managing the funds that your children inherited, and you may not agree with who it chooses. If you have beneficiaries who spend money unwisely or have asset limits in order to receive government benefits, the trust can hold their assets except for the specific situations you determine or when they need the financial support.
- Protecting Assets: You can establish parameters for how assets are used, such as not allowing the sale of property that you wish to remain in your family. Irrevocable trusts can also provide additional protection for assets from creditor claims and other situations.
Determining how these protections can work with your estate is much easier with a skilled attorney.
FAQs
Q: What Is the Major Disadvantage of a Trust?
A: The major disadvantage of a trust is the time and cost required to establish and maintain it. You must transfer the ownership of your assets to the ownership of the trust, which may mean you no longer have control over the assets if it is an irrevocable trust. This is also a potentially time-consuming process. It is also important that you engage an experienced attorney for help so you avoid any critical errors or creating an unenforceable trust.
Q: How Are Trusts Taxed in Missouri?
A: When a trust or estate earns income, Missouri has a fiduciary tax. The following trusts are required to comply with this tax:
- State resident trusts that must file a Federal Form 1041, the federal estate and trust income tax return, or an equivalent form
- Nonresident trusts with any taxable income source in the state or gross income equal to or greater than $600
A qualified estate planning attorney can help you determine how taxation will affect your trust.
Q: Is a Trust Better Than a Will in Missouri?
A: A trust provides more protections for an individual, their estate, and their beneficiaries than a will in Missouri. However, the document that is preferable will depend on your unique financial and personal situation, as well as your goals for your estate. A trust avoids probate court, saving time and money for your loved ones. It also provides more privacy. However, even if you have a trust, it is important to still consider having a will.
Q: Does a Trust Avoid Probate in Missouri?
A: Yes, a trust can avoid probate in Missouri. One of the benefits of a trust is the ability to avoid the lengthy and expensive probate court process. This is for the benefit of surviving loved ones, who would have to deal with this frustrating legal process and would be unable to access the assets until the process was completed. Along with saving loved ones the costs of probate, it also ensures they get the most benefits from the estate possible.
Establishing Trusts to Protect Your Interests
Anyone could benefit from a trust, even if they do not have a high-value estate. It can protect your financial and personal interests throughout your lifetime and safeguard your estate and your loved one’s well-being after you pass. Contact Stange Law Firm to learn how we can help you create an enforceable trust.
