Ohio residents with assets to their name should start thinking about estate planning, even if they don’t own anything of a particularly high value. When a person dies, a probate court typically oversees the distribution of the assets. This process can take years to finish and result in beneficiaries paying chunks of the assets’ value in taxes and fees.
Wills and testamentary trust funds, which are typically contained within wills and do not take effect until after death, all go through probate. However, having pre-designated beneficiaries for each asset can help speed the probate process along. Trusts that take effect during the life of the person creating the trust (known as a grantor) will generally avoid probate, whether they are revocable or irrevocable.
Irrevocable trusts, which are either simple or complex, cannot be changed within a grantor’s lifetime. However, they can be very beneficial to the grantor. Since assets placed in an irrevocable trust are no longer considered the property of the grantor, they won’t pay taxes on those assets. If assets in an irrevocable trust generate income, a grantor can either distribute the income to the beneficiaries during their lifetime or keep the income in the trust and pay taxes on it. The second option can only be done with a complex trust.
Revocable trusts do not have immediate tax benefits for the grantor, but they do allow for more flexibility. If a grantor expects that the birth of a child or the acquisition of an asset would affect the content and distribution of their trust, then a revocable trust is a safer bet. Individuals should compile lists of their assets, debts, and beneficiaries and speak with an estate planning attorney to find the best option for a trust fund.