Rippy, Stepps & Associates
Put your legal matters in order.Plan now for a more secure future.
501-358-3932
Payment Button
View Our Practice Areas

Conway Estate Planning Blog

Irrevocable trusts could suit various estate planning wishes

Finding the best way to distribute and protect estate assets after one's passing can be difficult. With so many estate planning choices available, many Arkansas residents may not know which best suit their circumstances. In many cases, individuals, their estates and their loved ones can benefit from trusts, but which kind?

The answer to the question depends on the unique details of the trustmaker and the estate. In many cases, irrevocable trusts can offer various protection benefits, but several types of irrevocable trusts exist. For example, some individuals may want to take advantage of an irrevocable life insurance trust. This trust would allow the payout of a life insurance policy to pass into the trust rather than going directly to the beneficiary. In turn, the trust could protect those funds from resulting in increased estate taxes.

Set up discretionary trusts for added asset protection

Passing assets on to loved ones is important for many Arkansas residents. They may know that their wills can help them do this, but it may be worthwhile to consider trusts more closely. Using this planning tool can offer more protection than wills and ensure that the beneficiaries receive the assets when the time is right. 

If a person wants to leave assets to someone who has not yet reached the age of adulthood, the underage beneficiary cannot directly receive those assets. In many cases, the court will appoint someone to manage the property until the beneficiary comes of age. However, setting up a discretionary trust could ensure that a trusted person is appointed to handle the assets until the right time.

Various assets can be placed in revocable living trusts

Various estate planning tools can help Arkansas residents protect their assets. However, trusts usually offer the most protection and most control when it comes to property distribution after a person's passing. If a person creates this type of account, it is important that it is funded, but some parties may not know what they can put into a revocable living trust.

Fortunately, many types of assets can be put into this type of trust. For example, if individuals have cash accounts, they can be funded to the revocable living trust. It is important to carefully retitle certain assets because some accounts could incur penalties for such actions, particularly CDs. Individuals could also put any stocks or bonds that they hold in certificate form into their revocable living trust, but a new certificate is needed.

Choosing someone to handle trust administration can be complex

Choosing to use trusts as part of an estate plan is often a wise decision, particularly for asset protection. However, trusts need someone to manage them after the trustmaker's passing, and trust administration can take time and have its own complications. As a result, Arkansas residents should be purposeful when choosing their trustees.

In some cases, people may choose to have the same person act as a trustee and as the executor of their will. This is not an entirely good or entirely bad decision as it can have its benefits and downsides. For example, naming the same person to the role could prevent miscommunication and confusion between the executor and trustee, but it also means that the person may not have someone else to keep him or her in check.

Special needs trusts can benefit numerous families

Having a child with special needs can mean making different plans at times. As Arkansas parents better understand the needs of their children throughout the years, they may come to realize that their children may need assistance well into their adult years. It is common for parents to want to ensure that their children will be taken care of even after the parents' passing, but providing funds directly can be tricky. Fortunately, special needs trusts can help.

This type of trust can be helpful because it allows parents, or other loved ones, to leave assets to a special needs person without potentially jeopardizing any government benefits. Because these benefits are often based on financial details of the recipient, if a special needs person inherits money, it could potentially disqualify him or her from government benefits. However, by placing the assets in a trust, the person does not directly receive a windfall.

Setting up trusts could help prevent causing more harm than good

Estate plans should not be considered once and then left alone. It is wise to go over the information and documents in a plan to determine whether anything needs to be added or removed from it. In some cases, Arkansas residents may feel that their initial plans are too simple and may find themselves wanting to add trusts to those plans.

Trusts can have numerous uses when it comes to estate planning. For some, setting up testamentary trusts could be a viable option. These trusts take effect after a person's passing and can be set up through a will or a living trust. The information in the will or trust can indicate which assets should transfer to the testamentary trust after the person's passing, who the beneficiaries are and how the distribution should occur.

Revocable trusts may help those who may change their minds

Many people in Arkansas and across the country have hesitations when it comes to making decisions that could be permanent. This feeling is understandable as people commonly change their minds. As a result, some people may hesitate before using trusts as part of their estate plans. However, this tool does not have to be permanent.

If individuals are concerned that they will change their minds regarding the details of a trust, they may want to utilize a revocable trust rather than an irrevocable trust. A revocable trust can be changed or canceled at any time. This means that if, for example, a person creates a trust to benefit a loved one and then has a falling out with the loved one, the trust can be changed to no longer benefit that person.

Moving retirement accounts into trusts could have consequences

When planning for one's estate, there are many considerations to remember. For instance, some Arkansas residents may think that if they are using trusts that it makes sense to move any and all assets over to the accounts. While ensuring that a trust is funded is certainly necessary, it is important to remember that moving certain assets could have unintended consequences.

One misstep that could take place when funding a trust is for individuals to think that they should move their 401(k) or IRA into the trust. The idea may be that the trust would add protections for the asset or that the funds could more easily pass to an intended beneficiary. However, if a person changes the ownership of a retirement account to a trust, the IRS considers that a complete withdrawal of funds. As a result, individuals would have to face the tax implications and possible penalties for such an action.

3 Advantages of an irrevocable trust

There are a variety of trusts to choose from when considering which will best suit your family and protect your legacy. One option available to you is an irrevocable trust. Whereas a revocable trust allows you to change the contents and instructions of the trust, you generally cannot change the terms of an irrevocable trust once they are set in place.

But what could possibly be the benefit to this? Turns out, there are a few key advantages of setting up an irrevocable trust.

Having an objective for a trust may help when estate planning

Many people start their estate plans with a will. Using this document is a good starting point, but it is not necessarily where the estate planning needs to end. For many Arkansas residents, adding a trust to their estate plans could allow them to better manage their final affairs, even after they are gone.

Trusts can be used for a variety of reasons, which is why it is important for individuals to consider what they want their trusts to do. Having an objective can help parties better understand the type of trust they may need to utilize and how they can best leave instructions to achieve their desired goals. The objective of the trust can be unique to the person creating it, which is why it wise to give it some thought.

Email Us For A Response