Setting up a Trust in Alexandria
What Is a Trust and Do I Need One?
These are complicated questions that depend wholly on a case-by-case analysis of a potential client’s assets and estate planning desires.
A trust is a legal instrument that directs how a person wishes to have their assets administrated during and/or after their death. Property in trust at the time of a person’s death does not go through the process of probate.
A trust can be advantageous, in many instances, a simple will is quite capable of accomplishing the desired estate plan.
Avoidance of Probate and Probate Taxes in Virginia and Washington DC
Property that passes through a trust is not considered part of the probated estate and therefore is not taxed according to a state’s probate tax. In Virginia and D.C. this probate tax is currently fairly minimal and often, alone, does not constitute sufficient reason to establish a trust.
Unlike a will that becomes a public record when admitted to probate, the trust is never filed publicly and therefore its contents remain private – known only to the grantor, the trustee and the beneficiaries.
For Blended Families
One major reason for a trust is in the event of a blended family in which one spouse is not the parent of some of the other spouse’s children.
In a typical will, a person will leave the residue of their estate to their spouse with the presumption that the surviving spouse will adequately take care of the shared children.
However, in a blended family, the parent of the non-marital children may wish to establish a trust for the benefit of the spouse so long as the spouse is alive and then for the children upon the surviving spouse’s death.
In addition to avoiding probate tax, there are other considerations regarding the estate tax and income tax that may warrant utilizing a trust rather than a simple will. This is especially true in the event that a person has significant assets in an IRA or wishes to bequest a significant amount to a non-profit.
Often referred to as a ‘spendthrift trust,’ a trust can be structured so as to provide for a beneficiary but simultaneously limit their ability to directly control the trust.
This can be advantageous because the assets not directly controlled by the beneficiary are not considered to be their lawful property (until and if the trustee distributes them) and are not generally subject to the claims of the beneficiary’s creditors.
Needs of Beneficiaries
Unlike a will, a trust can regulate if and when a beneficiary has access to funds even after the grantor is gone. In the case of a special needs beneficiary or a loved one who has trouble managing assets, the trust can exist for the length of that person’s life and direct the trustee to distribute only for that beneficiary’s health, education, maintenance and support (“HEMS”).
DIFFERENT TYPES OF TRUSTS
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