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Helping You Navigate Complex Legal Issues

The role of trusts in estate planning

Gregory A. Lang

A trust can be a very useful tool when estate planning, and its benefits are not limited to placing conditions on how assets are distributed. Minnesota residents may find that a trust can also help decrease or avoid the diminution to their estate invariably associated with probate court, estate taxes, gift taxes, creditors and lawsuits.

According to the executive director of National Association of Financial and Estate Planning, trusts may be of particular usefulness to those who have a net worth in excess of $100,000 and who want to minimize their estate taxes or have most of their assets in real estate, an art collection or a business. Those who wish to leave their inheritance in a manner not immediately payable to the heirs upon death or who desire to support a disabled relative without making them ineligible for government aid may also find a trust beneficial.

There are several types of trust commonly implemented. A credit-shelter trust is bequeathed an amount just under the estate-tax exemption line. This sum that can grow, tax-free, after the individual's death if wisely invested. Qualified personal residence trusts allow homeowners to gift their residence to their children after a specified interval of time, but the individual must outlive the trust for it to come into effect. A revocable living trust holds most of one's estate and is paired with a pour-over will to catch any assets not placed in trust at the time of death.

Consulting with an estate lawyer could help an individual determine the best way to set up a trust and plan estate transfers. Having a trust in place can provide the peace of mind that one's assets will be allocated exactly as desired, reaching the beneficiaries at the time and in the manner one sees fit.

Source: CNN Money, "Estate planning: Is a trust beneficial?", November 16, 2014

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