This article originally appeared on AZCentral.com – Please access the original article by clicking HERE.
At what point in your life should a trust be established? Is it based on what you have such as money, stocks or tangible assets? Is wealth an issue?
Answer: Arizona Republic personal finance writer, Russ Wiles, explains the ins and outs of living trusts:
“Most people who establish living trusts tend to do so later in life. But the short answer to these questions is that there’s no reason to delay, assuming you determine that a trust would be a good move for you. Trusts always can be altered or amended, if your situation changes as you get older.
“People establish trusts for various reasons. A desire to transfer wealth to beneficiaries outside of the probate process is an important consideration, but not the only one, as you may transfer many types of assets using other legal tools.
“For example, beneficiary deeds can be utilized to transfer Arizona real estate outside of probate, while pay on death and transfer on death titling can be used for bank and brokerage accounts. Similarly, you can pass stocks, mutual funds or other assets held in Individual Retirement Accounts or 401(k)-type retirement plans by naming beneficiaries for those accounts. You also can name beneficiaries directly on annuities and life insurance policies. The Arizona Department of Motor Vehicles has a form, 96-0561, for transferring cars and trucks.
“But if you don’t want your beneficiaries to gain access to your assets immediately – or even know how much and what you own – trusts can be helpful. With a trust, you can empower a third party to dole out the money gradually so that your heirs don’t quickly blow it. Similarly, trusts can be useful if you need someone to manage assets for a minor, disabled beneficiary or some unusual situation – even for the benefit of pets.
“Trusts can be more versatile than wills when it comes to transferring assets. And as noted, your assets wouldn’t need to go through probate, though that isn’t necessarily onerous.
“Trusts typically are drafted to include other valuable legal tools, such as health and financial powers of attorney. These brief documents allow you to name a trusted person to oversee your affairs if you’re still living but incapable of doing so for medical or other reasons.
“One area where most people don’t need a trust is to minimize estate taxes. Under federal law, you now may transfer slightly more than $5 million at death before taxes kick in (more than $10 million for a married couple who coordinate things). These amounts rise gradually with inflation. Most Americans don’t own enough assets for estate taxes to be a factor.”
