Do I Really Need A Trust?

Frequently we are asked “Do I really Need a Trust?”  What are the advantages of a trust. The following is a list of benefits of using a trust within your estate planning.

Reasons for Drafting Trusts

Asset Continuity.  Placing assets into trust can provide for greater control and allow for asset continuity.

Probate Avoidance or to Minimize Probate. If the trust is fully funded (that is property is placed into the trust before your death), there should be no need for a probate.  However, avoiding probate may be of little advantage for individuals who reside in Texas, Georgia, New Mexico and other states that provide for an inexpensive independent or summary administration.  The savings are significant in states that prescribe a statutory fee schedule, in effect, the living trust converts probate property into non-probate property.  Other property that is not probate property (and property that is not subject to the jurisdiction of a probate or surrogates court) includes:

– A life insurance policy if someone other than the estate is designated as a beneficiary;

– A retirement plan or account if someone other than the estate is designated as a beneficiary;

– A bank account if someone other than the estate is identified as a POD (pay on death) beneficiary or if the account is in the name of two persons with rights of survivorship.

Privacy. A probate usually requires the filing of an inventory.  In many states, a probate inventory requires the identification of property subject to probate, but does not require a report of non-probate property.  One key advantage of the use of a living trust is that we can gain “privacy” for our clients if substantially all of the client’s property is in a living trust (before death).

Flexibility. The trust law in most jurisdictions is far more flexible than probate law and the requirements for the formation and execution of a last will and testament.

Incapacity (Guardianship Alternative). A last will and testament takes effect at death and when the instrument is admitted to probate.  A living trust has its inception upon execution and produces a very real benefit for, and protection of the client during his or her life.  For example, a husband transfers all of his property to a living trust.  His daughter is a co-trustee (or the next successor as trustee) of the trust.  Father suffers an incapacitating stroke, and can no longer manage his property. Daughter assumes the position of sole trustee and             manages her father’s property in the living trust during her father’s disability.  Practical result: no guardianship of the father’s estate is required. There is no need to change record title to father’s assets.  All assets belong to, and are controlled in use and disposition, by the living trust.  Durable powers of attorney are also considered to be an alternative to a living trust. In my experience, banks and transfer agents are far more willing to work with the trustee of a trust, and often times are reluctant to work with the personal representative under a durable power of attorney.

Ancillary Probate and Mobility. We live in a mobile society. A living trust is more transportable from jurisdiction to jurisdiction.  The trust laws of most jurisdictions are similar and become more so with states adoption of the Uniform Trust Code.  A living trust can also avoid ancillary probates in multiple jurisdictions if you own property in other states.

Tax Advantages. Tax planning can be integrated within the trust.

Minor Beneficiaries. A trust can be used to manage assets for minor, incapacitated and beneficiaries who are unable or unwilling to manage assets.

Trust design and implementation can be like art.  Let is help you design your trust to match your unique needs. Contact us for more information and to get started.