Despite being around since 12th Century England, trusts are still very much talked about subjects. Yet, despite their popularity, trusts are not necessarily for everyone. Trust creation is not an easy undertaking. So why are trusts still so popular? A reason I commonly hear from seminar participants and clients is that it helps avoid estate taxes. However, that is not true – most trusts do not help you avoid estate taxes!
The following are key advantages of trusts:
-Avoid probate. A properly funded trust is a non-probate asset, meaning that property held in the trust does not fall under the jurisdiction of the probate court. This means that the assets can be transferred upon death to the beneficiaries, avoiding probate. This saves time and probate fees. When deciding if a trust is for you, always compare what it would cost to transfer your assets through probate versus the cost of creating and funding a trust. Probate is sometimes less expensive.
-Keep matters private. Matters filed with the probate court are public record, open to inspection. Trusts however, are private transactions.
-Control. A trust allows the grantor to write instructions on the use of funds – often limiting them for health, education, and maintenance. Also the role of trustee allows the grantor to assure that the management and spending of the trust is overseen by someone other than the beneficiaries, who often are too young or inexperienced to manage the assets.
Trusts can be time consuming and expensive, but they can also accomplish significant goals. Certain circumstances call for a trust, either Living (created and funded during life) or Testamentary (created upon death via instructions in a will). Those include people who:
-own property in multiple states,
-own substantial real estate,
-would like assets controlled if both parents die; and
-those who have family members with special needs.
If you feel a trust is right for you, seek advice from legal counsel who can advise based on your specific life situation.