If you think estate planning is not for you, you should probably reconsider. It does not matter if you are old or young, and it doesn’t matter if your finances are affluent or modest. If you have a family or business or own a home, it’s time to speak to a Cedar Rapids estate planning lawyer.

Estate planning is more than merely writing up a last will and testament. The best estate planning, combined with insights and guidance from the right estate planning lawyer, eliminates fear and confusion about the future. Good estate planning should provide genuine peace of mind.

Of course, there is no single estate planning strategy that is right for everyone. A last will and testament alone may be sufficient for some, but for many others in Iowa, your first estate planning task should be setting up a revocable or irrevocable trust.

What Is a Trusts?

Wills and trusts are estate planning documents that achieve many of the same goals, but if you own significant assets or real estate holdings, a well-drafted and well-funded trust ensures your properties and assets will be handled and distributed as you wish.

A Cedar Rapids trust attorney will draft a trust document on your behalf. You may then review and sign the document to put your trust into effect. You’ll be the trustee for as long as you live, and you’ll name a successor trustee who will manage the trust when that time arrives.

You may establish a trust in Iowa to provide legal protection for your properties and assets, to ensure that your properties and assets are distributed according to your wishes at the time of your death, to avoid the probate process, and to reduce or avoid estate taxes.

When you set up a trust, your assets may be transferred to the trust and then transferred to your beneficiaries – by your successor trustee – when that time comes. A successor trustee’s duties are comparable to the duties of a will’s executor.

Revocable and Irrevocable Trusts: How Do They Differ?

Should you establish a revocable trust or an irrevocable trust? How are revocable and irrevocable trusts different? The first difference between the two types of trusts is whether the trust itself can be modified after it has been created and put into effect.

With a revocable trust (also called a “living” trust), you will have the ability to modify, change, revise, or even revoke the trust entirely if and when you choose. An irrevocable trust, however, cannot be changed once it has been signed and takes effect.

If the protection of your assets is your primary reason for creating a trust, in most cases, you should choose an irrevocable trust. Your creditors can “go after” the assets in your revocable trust because you still have control of those assets.

Your creditors, however, cannot access the assets in an irrevocable trust. Those assets legally belong to the trust and not to you, so they cannot be legally considered yours or part of your estate.

Which Trust Offers More Protection From Estate Taxes?

As of 2022, the federal estate tax exemption is $12,060,000. For a married couple, the combined exemption is $24,120,000. Estates valued below these figures pay no federal estate tax, but for an estate worth more, an irrevocable trust should be prepared, and the estate tax can be avoided.

A revocable trust may be modified or revoked, so it can’t be used to avoid estate taxes. For that, you will have to set up an irrevocable trust. Here is an example of how an irrevocable trust helps you avoid the federal estate tax. Let’s say that an Iowa couple’s estate is valued at $30 million.

The couple can set up an irrevocable trust and transfer $6 million of cash, property, and/or assets into the trust so that the trust is now the owner. The value of the estate that the couple now owns in their own names is below the $24,120,000 mark, so they will not pay the federal estate tax.

Eleven states – but not Iowa – impose an estate tax at the state level. For years, Iowa has imposed an inheritance tax, but immediate relatives and charitable institutions do not have to pay that tax, and for other beneficiaries, the Iowa inheritance tax will be phased out entirely by 2025.

A Summary of the Differences

The primary difference between an irrevocable trust and a revocable trust is that a revocable trust can be modified or revoked when you need or choose to modify or revoke it, while an irrevocable trust, in most cases, cannot be changed. A revocable trust:

  1.  allows you to retain control of your properties and assets
  2.  gives your loved ones directions for handling your affairs if you are incapacitated
  3.  maintains your privacy and allows your estate to avoid the probate process

However, as mentioned above, a revocable trust provides no tax benefits and no protection from creditors. On the other hand, an irrevocable trust:

  1.  offers you several ways to reduce taxes
  2.  protects your assets from creditors
  3.  maintains your privacy and allows your estate to avoid the probate process

With an irrevocable trust, you no longer control the properties and assets that you move into the trust. Irrevocable trusts offer no flexibility. They’re tricky to understand and manage, but a Cedar Rapids trust attorney can help you and your successor trustee administer your irrevocable trust.

Should You Have a Comprehensive Estate Plan?

To set up either type of trust, or to establish a comprehensive estate plan, seek guidance and advice from a Cedar Rapids estate planning lawyer. A comprehensive estate plan includes a will or a trust, a durable power of attorney for financial matters, and a health care power of attorney.

If you are 18 years old or older in Iowa, you should have a durable power of attorney. A durable power of attorney empowers someone you name (your “agent”) to act legally on your behalf if you can’t. It lets your agent make real estate transactions and other financial decisions for you.

Without a durable power of attorney, if you become incapacitated, your loved ones may not even be able to cash your checks or pay your bills. What happens to your properties and assets could be decided by a court, and those decisions may not be the decisions you would make.

A health care power of attorney gives a person you name (usually a spouse or other family member) the right to make your medical decisions if you are incapacitated. A health care power of attorney addresses questions and concerns about end-of-life medical care and treatment.

What Else Should You Know?

Do not wait to establish a trust or to begin planning your estate. Now – while your mind is sound and it’s clear that you are acting voluntarily – is the time to create a trust and plan your estate.

To learn more, have a Cedar Rapids estate planning attorney answer your estate planning questions and address your concerns. Because no one knows what tomorrow may bring, the time to begin planning your estate is today.