When planning your estate, deciding what assets to include in your living trust is crucial for ensuring your wishes are honored without unnecessary delay after your passing. A living trust, typically used to manage your assets during your life and distribute them after your death, can include a variety of assets. However, not all assets are ideally suited for this type of planning.
Choosing the Right Assets for a Living Trust
Assets that you should put in a living trust are those that need to bypass the probate process for a smoother transition to beneficiaries. These usually include real estate, bank accounts and personal property that has significant value or appreciation potential. On the other hand, assets you shouldn’t put in a living trust generally include retirement accounts and other financial instruments that already have designated beneficiaries.
The Specific Case of Life Insurance
Life insurance is a unique asset because it inherently designates a beneficiary which typically allows it to bypass probate without being placed in a trust. However, putting life insurance in your living trust can have its advantages, such as providing more control over the policy and its benefits, depending on your specific circumstances and goals. When considering this, weigh the potential for appreciation and how this asset contributes to the overall value and balance of your estate plan.
Advantages and disadvantages
Incorporating life insurance into your living trust is a strategy that comes with both benefits and drawbacks, which must be evaluated to determine if it aligns with your estate planning objectives.
Advantages
One of the main advantages of placing your life insurance policy in a living trust is that it can offer greater access and control over the policy. This setup can better arrange for the proceeds of the policy to be used according to your specific wishes. Additionally, it can potentially provide tax protection for the beneficiary shielding them from significant tax burdens after your death.
Disadvantages
Despite these benefits, there are also some disadvantages to consider. Mainly, putting your life insurance in a trust may mean losing some control over the policy. For example, once the policy is in the trust, it might be more difficult to change beneficiaries or adjust the policy terms. And in some cases, there could be adverse tax implications that might affect the overall financial benefit of the policy for the beneficiaries.
What makes the most sense for You?
Deciding whether or not to include your life insurance in your living trust is a decision that should be thoughtfully made with your personal circumstances and estate planning goals in mind.
Consulting professionals
It is wise to consult with an estate planning attorney or a trust administration attorney who can provide personalized advice based on your requirements. These professionals can help you understand the complexities of trust administration and the implications of including various assets, such as life insurance.
Personalized Estate Planning We are a family-owned and operated law firm specializing in living trusts to ease the stress and expense of probate for your loved ones when you pass away. We understand our clients’ concerns because we’re a family, too, and we respond with experience, care and affordability. Our comprehensive living trusts are designed to bring clarity in difficult times and we offer a variety of services to ensure your estate plan meets your family’s unique needs.