Since the federal estate tax exemption is in the millions of dollars, most Washington, DC, residents no longer need trusts as a way to avoid their heirs having to pay estate taxes. However, taxes are not the only reason that living trusts are beneficial. These documents provide numerous benefits that can help individuals with their estate-planning goals.
For instance, a living trust -- which is created to hold a person's assets during his or her lifetime -- can provide a way for an individual to protect his or her assets as he or she ages. There may come a time when the individual is unable to manage his or her finances due to illness or injury. If his or her assets are already in a trust, the trustee will continue to manage them during this time for his or her benefit.
Once a Washington, DC, resident passes away, the assets are available for the beneficiaries of the trust. The trust can stipulate when distributions are made to them such as at certain ages or upon certain events. Based on what the creator of the trust knows about each beneficiary, he or she can determine when a distribution would be most advantageous for each beneficiary. Having the assets in a trust can also protect an heir's inheritance from creditors and ex-spouses.
Most living trusts are revocable, which means that the creator of the trust can change them during his or her lifetime. This allows additional assets to be added to-- or removed from -- the trust or for changes to be made to its provisions when appropriate. Trusts are not only for the wealthy and can help avoid a lengthy and costly probate process. Many people benefit from using this estate-planning tool.
Source: cincinnati.com, "Trusts remain useful tool in estate planning", J. Brendan Ryan, Nov. 21, 2014