Best Practices in Estate Planning to Maximize Your Trust

Trusts are a powerful estate planning tool. Unlike wills, they avoid probate and maintain privacy. They also protect assets from creditors and receive favorable tax treatment. Further, they allow you to dictate how assets will be spent. If you want to fund a grandchild’s tuition, for example, you can set up a trust that ensures your assets are handled responsibly.

Your estate planning should maximize the impact of your trust, legally minimizing taxes paid by the estate and your beneficiaries. Keep these five best practices in mind while working with your estate planning team.

1. Choose the Right Type of Trust(s)

Trusts are varied and complex. To meet your estate planning goals, you may need multiple trusts. For example, a qualified personal residence trust can remove the value of a home from your estate, which can be helpful if you expect your home value to appreciate significantly, such as a vacation house in a desirable area. Those who have been divorced and remarried may consider a qualified terminable interest property trust, which allows spouses to receive income from the trust until their passing, then transfers the remainder to beneficiaries.

A trust advisor can help you determine the right trust or trusts to maximize your assets while minimizing your estate taxes.

2. Fund Your Trust

Fund Your Trust
While funding your trust may seem like common sense, a surprising number of people don’t take this step after setting up their trusts. Once the trust documents are drawn up, your assets need to be transferred to the trust. Assets such as stocks and bonds, real estate and bank accounts not held in a retirement account need to be retitled. Personal effects should have ownership rights assigned to the trust. Accounts with beneficiaries, such as life insurance and retirement accounts, should have the beneficiary changed to the trust.

3. Draw Up a Pour-Over Will

A pour-over will is a critical part of a trust-based estate plan. Even with due diligence, some of your assets may not be named to your trust before your passing. A pour-over will states that any of your assets that have not been assigned to your trust should be transferred to your trust upon your death. While these assets will still go through probate, they will ultimately go to the people you intend, securing any assets you missed or accumulated after setting up your trust.

Without a pour-over will, your property could pass to your heirs according to state law, which may not align with your wishes.

4. Consider Gifting Assets Not in Your Trust

Consider Gifting Assets Not in Your Trust
Gifting money is an estate planning option that lowers the amount of money in your estate and releases you and the recipient from paying taxes on the gift. You can gift up to $15,000 per individual per year without paying a gift tax; however, gifts to spouses are typically not subject to gift tax, regardless of the amount.

5. Revisit Your Estate Plans Regularly

Ideally, you should revisit your estate plans at least once every few years to ensure that everything that should be in the trust is in the trust. Tax laws change frequently, and your family dynamics may change as well. Your will and other estate planning documents should reflect your wishes, and that can only happen if you regularly review your plans.

Your Partner in Estate Planning

Your Partner in Estate Planning
At Arthur State Bank, we offer a full range of trust banking services, including estate settlement and serving as trustees for trust accounts. As financial experts, we can act impartially and according to your wishes when it comes to your trust. Our trust staff has more than 30 years of experience in the trust and financial industries.

Whether you’re just beginning your estate planning, or you would like to revisit and update existing plans, we can assist you. Our team members will meet with you and any other trusted advisors, such as your accountant or estate planning attorney.

We believe in providing an extraordinary level of customer service, and we’re ready to help. Contact your local trust advisor today to learn more about our services and how we can help you transfer your wealth while minimizing tax consequences.


Request Mortgage Information