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Conway Estate Planning Blog

Trusts can be named as IRA beneficiaries

Many people utilize individual retirement accounts to save money. An IRA is an important account, and no Arkansas resident wants the funds to go to just anyone in the event that the account holder cannot collect the funds him or herself. Though retirement accounts are typically payable-on-death accounts, rather than naming a person as a beneficiary, some parties may want to use trusts.

It is not uncommon for trusts to act as beneficiaries of retirement accounts. Using this tool could allow account holders to ensure that the funds go to the intended person, but the account holder still has some control over the use of the funds. However, because the Secure Act categorizes beneficiaries and the amount of time designated to withdraw the funds, it can be more complicated. When it comes to using a trust, the beneficiary or beneficiaries of the trust will determine which category is used.

What specific ways could trusts be used for estate planning?

For too long, many people have believed the misconception that only wealthy individuals should utilize certain estate planning tools. In particular, numerous Arkansas residents may have believed that trusts are only used by individuals with a considerable amount of money to pass on to their loved ones. However, this planning tool could actually benefit those at any income level and for various reasons.

Trusts are versatile planning tools. Individuals can create a trust for a specific purpose often in efforts to help loved ones in the future. For example, people with special needs loved ones may wish to create special needs trusts. This type of trust can allow the loved one with special needs to receive his or her inheritance without jeopardizing the chances of qualifying for needed government benefits. Because most benefits are based on financial circumstances, including income, a sudden windfall could negatively affect the chances of receiving benefits unless they are kept separate, which a trust can do.

During estate planning, trust beneficiaries may have questions

When thinking about end-of-life wishes and property distribution, many Arkansas residents may find it helpful to include family members in the conversation. Often, estate planning affects various members of the family, and it can be wise to allow those individuals to have the opportunity to ask questions. In particular, parties who will be trust beneficiaries may need specific information.

Some beneficiaries may wonder why assets are being placed into a trust and not simply bequeathed in a will. This can happen because grantors want to better protect assets from outside parties or even to ensure that assets are used for a specific purpose. Explaining the intention and purpose of a trust to beneficiaries could help them understand its benefits and why the grantor chose to take this route.

Trust administration is a lot for trustees to handle

Creating a trust as part of an estate plan is something that many Arkansas residents do. This planning tool can help in many ways, especially when it comes to protecting assets and better controlling the distribution of those assets. Of course, when the time comes for trust administration, the trustee will have a lot to handle.

The trustee is someone chosen by the grantor to manage the trust after the grantor is no longer able to, commonly after death. The trustee can be a trusted friend or family member or even a professional. The trustee can also be the same person who acts as the executor of the estate if the grantor created a will and had assets that need to go through probate. During administration, the trustee should follow the grantor's instructions in regard to distributing assets and otherwise managing the trust.

Trusts are useful tools for avoiding probate

Probate can be a long and complicated process. In many cases, assets associated with the estate can be diminished through this process due to fees and other expenses. However, trusts could help interested Arkansas residents avoid probate and better protect assets for the future.

Trusts can help avoid probate and protect assets because property funded to the trust is removed from the estate. As a result, the testator technically no longer has ownership of the assets, depending on the type of trust used. A revocable trust could allow the testator to change details if necessary, such as if adjustments need to be made to account for a new beneficiary or change in marital status. Additionally, trusts can help the process of settling an estate go more quickly because probate is not needed.

Having the necessary documents is vital to trust administration

Being appointed as a trustee is a serious action. Arkansas residents who are acting in this role will have a great deal of responsibility as they have the duty of settling the trust in accordance with the trustmaker's wishes and state laws. If individuals do not have experience with the trust administration process, it can certainly seem complicated.

In efforts to better understand their responsibilities, trustees may want to gain as much knowledge about their duties as possible. The main duty is settling the trust, and it is necessary to have all documents associated with the trust, including the trust agreement and pour-over will, if applicable. Any other estate planning documents, like funeral instructions and financial information, will also be important to have during this time.

The right information may take the intimidation out of trusts

It is easy to feel intimidated by aspects of estate planning that go beyond just a will. However, this feeling of intimidation often stems from a lack of information. In fact, many Arkansas residents may feel more willing to utilize trusts as part of their estate plans if they know how to create them.

As with almost anything, it is important to start by gathering information. Individuals can determine what assets they want to include in the trust and who they want to bequeath those assets to. They also need to decide who they want to manage the trust, or be the trustee, and how the trustee will manage the assets. Information is also needed regarding the duration of the trust and under what circumstances could the trust be terminated.

Trusts need trustees, but appointing them can be tricky

Many estate planning tools need to have an outside party in charge. For example, Arkansas residents who set up trusts need to appoint trustees or successor trustees to manage those accounts. As a result, it is important that individuals choose the right person, which is not always easy.

Even if parties believe that a close family member or friend will be an effective trustee, that person may not necessarily have the right qualities for the role. Some individuals may have a hard time putting their biases aside, and as a result, the trustee may not act in an objective manner, which is needed to handle a trust correctly. If a trustee cannot remain objective, conflict regarding the account could arise, making more complications for those involved.

Bypass trusts could help avoid estate taxes

It is common for Arkansas residents and those across the country to worry about estate taxes. Though exemptions exist for these taxes, some individuals may need to take specific steps to work toward avoiding these taxes as much as possible. Fortunately, trusts may be able to help.

One way that married couples could work to avoid estate taxes on certain assets is to utilize a bypass trust. This trust actually works by dividing the remaining assets of the estate between two trusts. The first trust is a marital trust, and this trust remains in the possession of the surviving spouse. The marital trust is revocable. The second trust is a family trust, and it is irrevocable. 

Trusts can handle specific estate planning wishes

Making headway on an estate plan can be exciting. Arkansas residents going through this process may feel accomplished and relieved that they are tackling such an important task. Though some may start out with only the basic tools, others may want to branch out their estate planning efforts by using trusts.

If individuals are considering trusts, they may begin to wonder whether they really have a need for this extra tool. In most cases, anyone could benefit from adding a trust to his or her estate plan. After all, a trust can better protect assets in many ways. Plus, individuals can set up trusts for specific purposes and of specific types to ensure that their particular wishes for that trust are carried out.

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