Do you need a trust?
Many people use trusts as part of their estate plan. Because trusts are so prevalent, you may have friends, family or colleagues who have a trust, and may want to consider whether or not you need a trust too. However, every person's family situation and combination of assets is unique. Your goals are also critical for determining whether or not a trust is the right legal tool for you. If it is, we can discuss what kind of trust is best. If you are better served by a different legal tool, or don't need to incur the expense of establishing a trust, we will describe your legal options so you can make a good and informed decision about how to move forward.
What is a trust?
A trust generally allows you to exercise control over your assets and how they are used for a period of time - during your incapacity, or after your death, rather than distributing your assets outright immediately. Like assets that are owned by a company, if the manager (trustee) is unable to continue their job, the tasks of management pass to the next designated individual, a successor trustee. This creates a smooth transition and ensures that someone is always available to care for the property or funds in the trust. A trust is a legal document establishing a separate legal entity, and it can generally own accounts or property, just like an individual.
What kind of trust do I need?
All trusts are not the same. There are many words you will hear used with the word "trust" to describe what a particular trust does: a revocable living trust, an irrevocable trust, a grantor trust, and irrevocable life insurance trust (ILIT or "eyelet"), qualified terminable interest property trust (QTIP), a real estate investment trust (REIT), a charitable trust, a Miller Trust, a pooled trust, a special needs trust, a supplemental needs trust, an asset protection trust, etc. The list goes on and on! Don't let all these names intimidate you. Each trust has a purpose, which is why it is so important to clearly discuss your goals with your attorney, who can design and draft the provisions of the trust to fit your needs.
Why might you use a trust?
Here are some sample purposes for establishing a trust:
- To avoid probate (which may or may not be beneficial)
- To ensure consistent management of assets after the death of their owner, or during their owners incapacity
- To provide for minor children who are not yet ready to inherit
- To provide for a second spouse, while leaving wealth to children of a prior marriage or relationship
- To ensure that assets will go to your chosen beneficiaries, and aren't redirected by a vulnerable surviving spouse because of undue influence from a child, a caretaker, a new love interest or another self-interested individual
- To give assets with a condition – for instance, if the beneficiary completes college, then they will inherit
- To protect assets from dissipation by a beneficiary who is not good with money
- To protect assets in the event of a creditor (such as unexpected large judgment resulting from a catastrophic accident)
- To protect assets in the event of the future divorce of a beneficiary
- To protect assets from being used for self-harm or abuse by a beneficiary struggling with drug, alcohol or mental health issues
- To protect assets from preventing a beneficiary from qualifying for important public benefits, including health care
- To provide for the care of a pet
- To ensure the ownership of firearms or other regulated assets without governmental interference
- To manage property (like a family home) over time and among multiple beneficiaries
- To accomplish a goal, such as providing for the education of all your nieces and nephews
- To ensure private management and distribution of your assets after death, and avoid undesirable publicity
- To provide flexibility in distributing probate and non probate assets (life insurance, investment accounts, real property)
- To protect assets from being considered as a resource from Medicaid
- To protect assets from being considered marital property
- To protect an investment professional from allegations of insider trading
- To protect a judge or politician from allegations of conflicts of interest
When discussing a trust with your attorney, you may use this list to help craft your own list of goals to describe why you are interested in pursuing a trust.