Estate planning is a complex task for anyone, but when you have investments and other assets that are large enough to fall under the estate tax statute, it can be even more challenging. With Tennessee adopting statutory taxation levels well below those in place at the federal level, many more people in this state are affected by the tax, and learning how to protect your family and your assets is a vital part of the planning process.
In most cases, assets can be protected through the use of a trust, which allows for the use of those assets by members of the family according to the rules outlined in the trust and the discretion of the trustee managing the fund.
Using a trust during your lifetime
Living trusts have become more and more popular because they allow for the creation of a trust during your lifetime that you can manage or designate a representative to manage, and they provide a number of benefits such as protection from aggressive credit collections. The uses a trust can be put to are limited, though. For instance, if a trust is found to have been created explicitly to defraud a creditor, then it can be dismantled by a court.
If you plan ahead, though, and there are no outstanding past due debts, it can be a simple matter for an experienced estate planning attorney to begin the process of creating a trust for the estate. How simple the end result will be depends on what is needed and how many assets need to be covered.
Using trusts alongside a will
Using trusts to handle assets can be a great way to protect the estate from creditors and excessive taxation, but it does not replace a will. There are several reasons for this:
- Spousal inheritance pre-empts the trust document, meaning you cannot add property your spouse has a right to inherit to the trust without a spousal signature authorizing it.
- Income the trust accrues may be subject to regular income and capital gains taxes.
- The process of setting up a trust makes the details of the estate public, which can be an issue for some people.
On top of helping to avert excessive taxes, a trust can also be used to help you make sure the estate is protected from spendthrift relatives and other threats that could hurt its ability to take care of the people it is supposed to care for in the long-term.
If you are interested in exploring a trust to simplify your probate process and protect your assets, contact an estate planning attorney today.