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The benefits of trusts over a simple will for unmarried partners

If your estate plan involves leaving everything to a loved one who is not a spouse when you die, you could be lowering the value of your assets significantly through estate tax. According to, when Philip Seymour Hoffman made this mistake in his will, he cost his family about $12 million in estate taxes

Although marriage would ensure that estate taxes would not hit your spouse in most cases, you do not have to take this drastic step in order to avoid the heavy penalties. Instead, you could create one or more trusts to protect your loved ones from losing the inheritance you provide.

For your child

Hoffman had concerns that placing assets in a trust for his children would create a situation where they might rely too heavily on their inheritance. However, the amount of control that a trust provides you can help you ensure that this does not happen to your child. For example, you can designate in the trust exactly how much the trustee will provide for your child's needs, allowance and education with limits that ensure he or she does not become a "trust fund kid." You could also withhold the remainder until your child is an adult and reaches whatever age you think best.

For your significant other

You can create a trust for your significant other, too. By making him or her the trustee and beneficiary, you are providing control of the funds directly. Although you may want to make some stipulations, you could leave it to his or her discretion, too. If your significant other has difficulty managing finances, there are types of trusts that can keep the assets safe from creditors. There are also options that would reduce or eliminate tax issues when your loved one dies and your children inherit the remainder of the estate.

The value of your estate may not be in the millions as Hoffman's is, but your loved ones may still benefit from a trust. You may want to speak to an attorney about what options can best protect your assets.


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