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3 financial reasons people add trusts to their estate plans

On Behalf of | Dec 27, 2023 | Estate Planning |

A trust is an estate planning tool that not enough people utilize. People often think of trusts as tools for the incredibly wealthy who want to provide regular income for children or grandchildren. While that is one goal individuals can achieve with a trust, trusts can serve a variety of other purposes as well.

For example, trusts can help people take control of their finances during their golden years and have more control over what happens with their property after they die. There are numerous financial benefits that people can derive from creating and funding a trust. What financial reasons would people have for creating and funding a trust?

They worry about debt collection

Creditors can be a real financial concern for those living on a fixed income during retirement. Creditors can sue those who fall behind on payment arrangements. Even if no creditors sue people in their golden years, they will likely make a claim against that person’s estate when they die. Those claims can consume a significant portion of someone’s estate and leave much less for their loved ones. Asset protection planning often involves the creation of a trust to shield specific assets from debts in the future.

They worry about affording nursing home care

It costs thousands of dollars a month to live in a nursing home, and many people cannot pay for those costs out of pocket. They may hope to qualify for Medicaid, but doing so can be a challenge. Medicaid will look back at five years or 60 months of gifts and transfers. People could end up responsible for a major penalty when they do not have the resources to pay for their own care. Creating a trust and moving major assets to that trust more than five years before applying for long-term care benefits through Health First Colorado could help people qualify more quickly if they need support.

They are at risk of estate taxes

Estate taxes require payment before beneficiaries and errors receive the Assets in and state. The total value of the property in someone’s name when they die determines if they are responsible for the estate taxes. While Colorado doesn’t collect estate taxes, the federal government does. As of January 1st, 2024, any estate worth more than $13,610,000 might be subject to federal estate taxes. Trusts can decrease the value of someone’s estate so that they don’t need to pay those large taxes.

Using the right tools to create a comprehensive estate plan may give Colorado adults more peace of mind and allow them to leave a lasting legacy when they die.