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3 Financial Trusts That Help Ensure Last Wishes Are Met

Families become divided for many reasons and the conflicts are never more contentious than during the reading of a will.  Seek out legal advice whenever there is a concern about the possibility of a contested will or misdirected inheritance. Establishing a trust is one of the options a lawyer may recommend. Here are three examples of how specific trusts provide security.

1. A Trust for the Cause Matters Most 

Many people give generously of their time and money during their life and want to continue to contribute after they are gone. It is wonderful to remember a charity in a will, but a charitable trust offers additional benefits. A charitable trust protects inheritances from challenges, offers tax savings for the grantor and their heirs, and it earns income as well. 

Charitable trust grantors financially benefit if they establish the trust while they are still alive, for example, when appreciated assets are transferred into a charitable remainder trust, the donor gets a tax break for the donation.

As mentioned, the grantor of the donated asset may also earn a profit. Trustees sell the asset that is donated and the income earned is invested. The profit from the investment is paid to the grantor for the remainder of their life.

Once the grantor passes away, any remaining money left in the trust goes to the chosen charity or charities.  This is advantageous to the beneficiaries, since the amount of the asset is no longer factored into their estate balance, so the family pays fewer estate taxes after death.

A charitable lead trust is similar to a charitable remainder trust, but the annual payout on the investment goes to the charity. This payout takes place either after the grantor's death or for a predetermined amount of time before their death. After the grantor passes away, any remaining assets left in the trust are paid out to the chosen non-charitable beneficiary.

2. A Trust for Family Members With Special Needs

The law allows people to provide for their loved ones with special needs who collect government benefits. Special needs trusts make certain that a family member with a disability will maintain a comfortable lifestyle after a parent or guardian passes away. This trust also protects the individual from other family members that may attempt to control or revoke the gift.

Establish a special needs trust to cover the expenses that the individual cannot get with their normal benefits. It is legal for the money to go towards medical care, a vehicle, and for items that add to their comfort and happiness.

3. A Trust for Unreliable

Some people may worry about leaving large inheritances to family members that don't know how to handle money responsibly. A spendthrift trust is an irrevocable trust that secures the money left behind and requires the inheritor to spend sensibly.  This type of trust is a solution for people that love to shop and for those with drug or alcohol problems or gambling addictions.

An additional benefit of an irrevocable trust, like a spendthrift trust, is that it is not vulnerable to creditors. The money is safe even after a bankruptcy because the trustee, and not the beneficiary, controls the funds. Many irrevocable trusts protect against creditors, but when an heir lacks basic financial management skills, a spendthrift trust is even more important.

Trusts are just one of the tools you can use to protect the assets you have accumulated over your lifetime. The Law Office of Leon A. Karjola has many additional options available to help people protect their interests and their heirs. Schedule a consultation to learn more about the importance of estate planning.