Testators in Utah often draft wills to designate a guardian for their underage children or beneficiaries for their personal property. Some people will also add other documents to their estate plans.
A trust is a powerful tool that far too many people dismiss without giving it appropriate consideration. Trusts offer numerous benefits and can be useful for people in a broad range of personal circumstances. Many white-color professionals and middle-class families discover that a trust is the estate planning tool they need.
What reasons would a typical family have for creating a trust in an estate plan?
To reduce tax liabilities
Taxes can affect an estate in numerous ways. While Utah does not levy an estate tax, the federal government does. Multi-million dollar estates may be subject to significant tax liabilities. Trusts are also useful because they can help avoid capital gains taxes and income taxes for the estate itself following the sale of estate assets. Property transferred into a trust will not be part of an estate and will therefore not trigger the taxes that property owned by the deceased would.
To protect themselves from creditors
When people live a long life, they may start to run low on financial resources despite decades of saving as working adults. Creditors can take older adults to court and claim some of their property if they fall behind on their bills.
Even if the creditors are not that aggressive, they will likely make a claim against someone’s estate after they die, forcing the liquidation of assets to pay those debts later. When you move property into a trust before creditors take legal action against you, you minimize their ability to claim those assets.
To qualify for Medicaid later
You may hope that you never require Medicaid, and many older adults never do. However, if you do need Medicaid benefits for nursing home care or other expensive forms of medical support, you want to be able to qualify right away when you apply and to avoid a penalty.
Advance planning for Medicaid often involves the creation of a trust to reduce someone’s personal property. A trust will both make it easier for someone to qualify when they need medical care and will protect those assets from estate recovery efforts later.
Understanding the possible benefits of adding a trust to your estate plan could help you better protect yourself as you age and your loved ones after you die.