Trusts are legal entities that own assets, and all trusts are not alike. They are created by a written trust document with certain provisions that can vary from trust to trust.
The saying goes that anyone who does not learn from mistakes in the past, is doomed to repeat them. In estate planning, if you do not learn from other’s mistakes, you are likely to repeat them.
Estate planning is not just about saving taxes, it is also about managing and protecting your assets against future creditors, both for you and for your beneficiaries.
If you think of estate planning as something only ultra-wealthy people need to do, you’re not alone. That’s a common misconception.
If you have updated your estate plan during the Covid crisis and even found a way to sign your documents while maintaining social distance, do not overlook the last step of trust funding.
Beneficiaries of a trust typically pay taxes on the distributions they receive from the trust’s income, rather than the trust itself paying the tax. However, these beneficiaries are not subject to taxes on distributions from the trust’s principal.
No matter what line of work you are in, estate planning has facets that apply to everyone, and it comes down to documenting wishes and avoiding probate and unnecessary taxes. Too many people put it off, but, in general, the sooner you do it, the better.