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Heritage Tree LogoWhat is the Difference Between a Trust Fund and an Inheritance?

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When you are establishing your estate plan, there are many different tools that you will have to navigate. For one, you will have to determine when it is best to create a trust fund and when it is beneficial to establish an inheritance. Follow along to find out the difference between a trust fund and an inheritance and how one of the proficient Butler County trust attorneys at Heritage Elder Law & Estate Planning, LLC can help you distinguish between the two.

When is it beneficial to establish a trust fund?

Simply put, a trust fund may be beneficial if you possess high-value assets or otherwise many assets that amount to a significant amount of money. This is because a trust fund is an estate planning document that sets guidelines for how to distribute your assets to your loved ones in the event that you pass on. More specifically, this document reduces estate tax liability for your loved ones, along with allowing them to properly protect the property included in your estate.

In addition, this document allows your loved ones to avoid state probate requirements and their associated expenses. This is beneficial if your loved ones need access to these funds to pay bills or maintain the property included in your estate.

With that being said, you may be more inclined to consider using a trust fund in the following circumstances:

  • You believe that you may undergo a divorce or separation from your beneficiary.
  • You believe that your beneficiary has a tendency to spend excessively.
  • You believe that your beneficiary is experiencing financial difficulty.
  • You believe that your beneficiary will run into litigation troubles.

When is it beneficial to establish an inheritance?

On the other hand, an inheritance may be beneficial if you only possess a few assets that amount to a small amount of money. This is because establishing an inheritance is far more cost-effective than that of a trust. What’s more, the process is much simpler. That is, with your living inheritance plan, you will simply have to spell out who you want to get which property, and how you want them to receive it.

With that being said, it may be in your best interest to use a living inheritance if any of the following apply:

  • You believe that you already have an adequate financial cushion for the last decades of your life.
  • You believe that removing assets from your estate now will reduce their tax liabilities later.
  • You believe that giving your significantly appreciated assets will help avoid capital gains taxes.

For more information on what path to choose for your estate plan, you must talk with one of the talented Butler County estate planning and probate attorneys. So, schedule your initial consultation with Heritage Elder Law & Estate Planning, LLC today.

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