What changed with Trusts?
Updated: Mar 8
There's been a few changes in trust law since you probably last looked at getting a trust. Right now, we are teaching workshops in Scottsdale on new way to tackle your Estate Plan. Before you start looking at getting a trust, can I just say that not all trusts are created equal. Trusts vary from state to state with each one offering similar benefits, but a few have a unique tax sheltering to them you can use to give your estate the most protection from taxes, spend thrifts, and other liabilities.
It's important to make mention that even though you're not in the state you would prefer to have a trust from, you can still create a trust if you work with the right companies to do so. This is all made possible via the Uniform Trust Code.
In 2000 the government realized how very thing the trust law is in each state, so they created what's called model rule. Basically a guideline that all trusts now abide by now matter what state you purchased one in.
At Paradigm, we work with a company called Integrated Trust Systems. They help us implement a trust that can be used in any state according to the UTC. That way we can offer Nevada Trusts to our clients, which offer the highest protection against creditors and predators, and offers zero capital gains tax.
Before you get a trust however, you could consider why a will wouldn't suffice. Wills provide the probate courts with a direction in which to take your estate. It is however a public process, which opens many estates up to contestation. Obviously leaving your heirs scrambling to get what's left over. Not to mention the average fees in probate are 10% of your estate, while another 30% goes to taxes. Only use a will if you do not think your money will last longer than your retirement. If this is also the case, it may be wise to get a retirement income analysis to make plans to protect your money and generate more streams of guaranteed income. Here's 3 reasons why you would want a living trust.
If you are a home owner, have any investment properties or networth over a million dollars. These investments are subject to tax while not all subject to probate. The inheritance will be taxed if distributed through beneficiary designations (I'm talking retirement accounts), since no payment plans were established. With a distribution plan you can filter the payments of IRA's to specific beneficiaries. Thanks to the new SECURE ACT however, all Bene-IRA's have to pay out over 10 years or less. A Nevada Trust under the UTC, will provide your estate with zero capital gains tax on this money which could be super helpful for your beneficiaries, protecting your generational wealth from more unwanted tax.
1. If you plan on being on Medicaid for your long term care, you might consider getting a Medicare Asset Preservation Trust. This will act as a sub-trust within your living trust. It protects your assets from being taxed in the event you cannot pay your medical bills for nursing home or long term care.
2. If you also have kids who are listed as joint owners on some of your accounts or properties, you could be subject to losing these assets if they are sued, divorced or bankrupt. This is actually quite common. If the assets are placed in a trust, the predators can't get access to these accounts. (Revocable Trusts offer this sort of protection).
3. In any case, getting a trust is the right more for your estate if you believe any of the three could be true for your story. I know, estate planning is often delayed, but the moves you can make right now will actually benefit you too down the road. It also makes protected any inheritance you might receive in the future. I can tell you that many put this off until it is too late. Only 50% of Americans have a trust or a will. Leaving their families in confrontation in the aftermath of their death.
As Marcus Aurelius says, "If you could leave life right now, let that determine what you do or say."