By using trusts, our clients can accomplish their family goals in protecting assets, providing for future generations and avoiding the cost of expensive court probate proceedings. Although sometimes other alternatives are appropriate as part of an estate plan, trusts are often the best way to allow distribution of assets quickly and inexpensively at death. In certain situations, significant tax savings can be realized by using trusts.
We have often used “special needs” trusts to protect the income eligibility of people receiving certain governmental assets, such as Supplemental Security Income. For example, if parents have a child who receives SSI because of a disability, if the child inherits property upon the death of their parents, the child will become ineligible to receive the SSI until the inherited funds are spent. By using a special needs trust, the child can remain eligible to receive benefits and still retain the ability to have inherited assets used for the benefit of items not covered by government benefits.
Sometimes children are unable to responsibly manage inherited funds. For example, under Kentucky law, unless a will or trust provides otherwise, beneficiaries get full access to their inherited funds when they reach their 18th birthday. In most instances, this is too young for a person to have the maturity to appropriately manage and deal with a large sum of money. In other situations, a child may suffer from addiction, mental issues, or marital issues that make it inappropriate to protect inherited assets from being lost by the beneficiary in a short period of time. The use of the proper trust can ensure inherited assets are protected for the long-term benefit of the child or beneficiary.
In certain large estates, trusts can be utilized to ensure the estate of the surviving spouse does not become too large and therefore subject to the federal estate tax upon the death of the second spouse. Trusts can be prepared so that the all of the estate is available for the benefit of the surviving spouse, but prevent the entire value of the estate from being included in the estate for tax purposes.
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With more than 30 years experience in the practice of law, we have served thousands of clients in south central Kentucky. Contact Orwin & Fries for an initial consultation. We offer you a mutually beneficial and long-lasting professional relationship.