When people hear the term “trust fund,” they usually think of the super-wealthy, but trusts are not just for those with incredibly high-asset estates. Many middle-class to upper middle-class families would benefit from a trust. Anyone who is contemplating their estate plan in the near future should at least consider some of the ways that a trust might help your family. With this in mind, here are just three simple common sense reasons why you should consider creating a trust for your estate plan.
Reason #1: Tax Benefits
Alabama does not have an estate or inheritance tax, meaning that you and your heirs are not taxed by the state on the value of an estate. Likewise, the federal estate tax has been doubled as of 2018. Therefore, unless you have an estate valued at more than $11.2 million per person or $22.4 million per married couple, you should not face an estate tax. Although this eliminates some of the tax benefits of creating certain kinds of trusts, one should keep in mind that the new tax law has a sunset provision. These increased thresholds are only good until 2025. So, the limits could quite possible revert back to their prior limits of approximately $5.5 million per person and $11 million per couple. A trust can be established to protect assets, if this is a concern.
Reason #2: Life Insurance Trusts
Some states make you name individuals as beneficiaries for life insurance. Fortunately, Alabama allows you to also name a trust as a beneficiary. By doing this, you can protect future life insurance proceeds. For a young middle-class worker with a $1 million term life insurance policy, consider the benefits. If you are the sole earner for the family and you die, leaving a large amount of insurance money to your spouse and children, you have little control over how the money is used. If your spouse were to remarry and later die, all of the money intended to take care of children might go to the new spouse or that person’s children. When you die, you lose control over how money is used. A trust can help protect against that.
Reason #3: More Options
Simply put, Alabama trusts have more options than wills. Although they do require a little more planning and work to prepare, a trust gives you many options that a basic will cannot offer. For instance:
- Spendthrift provisions. Protect against wasteful heirs or those with drug or criminal issues.
- Incentives for heirs. Create financial incentives for heirs to be successful.
- Privacy. Keep your family’s affairs out of public court records.
- Probate avoidance. Avoid costly court administration.
- Much more
Get Help Planning Your Estate
In Birmingham and the surrounding areas, the attorneys of Five Points Law Group want to help you protect your estate from unnecessary taxes and ensure that you understand all of your options. Trusts are not just for the super wealthy anymore. Anyone who wants privacy and wishes to avoid probate should consider a trust. Likewise, if you want more control over your assets and wish to protect your legacy, then there is probably a trust that is right for you. Call or visit us online to schedule an appointment to review your options today.