You don’t have to be wealthy to create a trust. Trusts are an important step in the estate planning process and give you peace of mind that your assets will end up in the right hands. There are several different types of trusts, including living, revocable, and irrevocable trusts. All of these are legal arrangements that ensure your assets will be given to selected beneficiaries either while you’re alive or after your death. You determine which assets to put in the name of the trust and authorize a third party to administer said assets to your beneficiaries.
The Benefits Of A Trust
You have full control over a trust, meaning you specify the terms. The ability to be strategic allows you to protect your assets following a divorce, control when your children can access money, or control how your beneficiaries can use their inherited money. You’ll have privacy with a trust because it prevents your assets from going through probate, which can take several months. When your assets go into probate, they become public records, which means your financial business is out in the open. Avoiding probate gets your assets allocated to your beneficiaries more expediently.
Real estate is a common asset that is inherited, and it can either be private or commercial. If you’ve inherited commercial real estate in the city of Seattle that houses a restaurant, that’s great news, since setting up a restaurant takes a lot of time and a lot of capital. Purchasing new restaurant equipment isn’t always practical if you have a limited budget, which is why it’s a good idea to consider used restaurant supplies. The Restaurant Warehouse has low prices on the restaurant supplies you need for a commercial kitchen, bakery, or deli. Their Seattle restaurant store provides used restaurant equipment Seattle including glassware, dinnerware, disposables, small wares, refrigerators, and more. By purchasing restaurant equipment in Seattle area auctions, the supplier can offer unbeatable low prices and customer financing.
Taxes and Trusts
The best way to understand any tax implications with trusts is to consult a professional. You may owe federal estate taxes upon your death if you have a large estate that exceeds $11.5 million. Some states have their own estate taxes as well based on their own estate size thresholds. Some states do have inheritance taxes which are separate from estate taxes and paid by the beneficiaries.
If any assets in a trust generate income, your beneficiaries may be liable for paying income taxes or capital gains taxes, depending on who legally owns the assets. If the income goes directly to a charity, it may be considered a tax-deductible donation.
It’s not uncommon for trustees, executors, administrators, private fiduciaries, and estate and trust attorneys to run into problems when administering cash-poor trusts, estates, or probates. These problems include how to equalize and distribute assets fairly, how to pay for an estate’s expenses, how to pay off a reverse mortgage home loan, and how to structure the trust so that a sole beneficiary receives real estate while other beneficiaries receive an equal share.
Trust loans are specialized inheritance loans made by a trust loan company or private money lenders. These loans aren’t offered by traditional lenders and financial institutions because the borrower’s name isn’t yet on the title of the real estate. A trust must stipulate that the beneficiary or trustee can borrow against real estate owned by the trust, which will be used as collateral.
HCS Equity is an example of a private equity lending company that specializes in real estate loans for trusts and estates. Rather than turning to personal loans or consumer loans, private equity firms offer home equity solutions that help beneficiaries and estates cover expenses.
A great advantage of living trusts is that your beneficiaries can avoid probate. Since you have a legal document detailing the transfer of assets, there is no need for a court to validate your will, settle your estate, distribute your assets, and pay estate taxes. Avoid probate means avoiding the headache of finalizing your wishes and postponing the distribution of assets. Trusts also protect your beneficiaries from themselves because there will be no arguing or contesting who gets what assets.
Setting up a trust is a smart way to maintain control over your assets, prepare for tax implications, and help your beneficiaries avoid probate.