Understanding the Role of Trusts in a Connecticut Estate Plan

 Posted on May 11, 2021 in Estate Planning

Many people equate estate planning with creating a last will and testament. While a will can certainly be a useful estate planning tool, several other estate planning instruments may also benefit you and your loved ones. Trusts are commonly used to transfer assets without needing to go through the probate process. Trusts are especially beneficial for individuals with minor children or wish to leave an inheritance to someone with a disability. Utilizing trusts in your estate plan can also help you protect assets from creditors and minimize estate taxes.

How a Revocable Living Trust May Benefit You and Your Family

There is a trust for almost every estate planning objective a person can have. However, most trusts fall into two main categories: revocable trusts and irrevocable trusts. A revocable living trust is a trust that you establish during your lifetime and use to transfer assets to heirs upon your death. You maintain control over the property in the trust until you pass away. At this point, your successor trustee takes control of the assets and manages the distribution of those assets. Living trusts are revocable or adjustable. Assets transferred through a living trust do not have to pass through probate, meaning that the assets are transferred to beneficiaries more quickly than assets transferred through a will. 

Irrevocable Trusts May Provide Tax Benefits and Protect Assets from Creditors

An irrevocable trust may only be modified in specific situations. Fortunately, legislative changes that took effect on January 1, 2020, made it easier to modify irrevocable trusts in Connecticut. When a property is placed in an irrevocable trust, the trust becomes the owner of the assets. This can dramatically decrease the size of the grantor’s taxable estate. Furthermore, an irrevocable trust may allow you to avoid paying taxes on the income generated by the assets contained in the trust. Property in an irrevocable trust is also protected from creditors or future legal judgments.

Contact a Connecticut Estate Planning Lawyer

There is a multitude of estate planning tools available to Connecticut residents. The estate planning instruments that are right for you will depend on your financial circumstances, personal objectives, and estate planning needs. At Ivey, Barnum & O’Mara, LLC, we understand the advantages and disadvantages associated with various estate planning strategies. Our Stamford estate planning attorneys can help you design a plan that works for your unique situation. Call our office today at 203-661-6000 to set up a free consultation.

Sources:

https://www.forbes.com/sites/ashleaebeling/2020/01/10/connecticut-revamps-trust-laws-opening-door-to-tax-savings-and-more/

https://www.investopedia.com/terms/i/irrevocabletrust.asp