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Do You Need A Trust?
Published November 21, 2019
This is the primary question asked by many of our estate planning clients. So, here are our top 10 reasons to consider a trust (in no particular order). Please keep in mind that there are many different types of trusts and one size does not fit all.
1. You don’t want your estate to go through the probate process. While the probate process is probably not as bad as you think, it has gotten more cumbersome lately due to budget cuts and less help at the courthouse. So, as lawyers, we can try to convince you that probate is not that bad, or, we can just help you avoid it.
2. You prefer privacy. Once you pass away and your will is probated, it becomes a public document. You might say, “why should I care, I will be dead,” however, your family and beneficiaries will be mentioned in the will and those surviving you might care. This is a concern for not only famous and/or wealthy people, but also many “ordinary” folks who value their privacy and might prefer to create a trust.
3. You want to make it easier for the person who will handle your affairs if you become incapacitated or after you pass away. Practically speaking, it’s easier for a successor trustee to get control of your assets than it is for that same person when they are named as agent under a power of attorney or as executor of your estate.
4. You have a complex situation. Most people don’t think their affairs are complicated. They view their estate as “simple.” However, once they become incapacitated or die, it becomes apparent that things are not so “simple.” By placing your assets into a trust, you make things much easier for your successors to manage your assets.
5. You have complicated distribution plans. Let’s say you want to limit how much of an inheritance a beneficiary is to receive at certain points in time. By having a trust in place, you will be able to have more control over how much the beneficiary receives and when they receive it.
6. You have real estate in more than one state. Question: What could be worse than having your estate go through probate? Answer: Having to go through probate in two states. Even though probate is probably not as difficult as you might think, why would you want to do it twice? Well, this is exactly what would happen if you own real estate in more than one state. Your estate would have to go through the process in each state. Some states are much more complicated and expensive than New York. So, if you have real estate in more than one state, you might want to think about a living trust.
7. You have professional children, or wealthy children. Your son is an anesthesiologist, and your daughter is an investment banker. Why do they need their inheritances to be in trust? They don’t — but it’s an extra gift from you to put them in trust. You can help protect their inheritance from creditors, malpractice claims, and even divorce proceedings. And you might be able to keep your assets out of their estates when they die, thereby reducing the amount of estate tax the grandchildren pay.
8. You have minor children, or children (or grandchildren). Think about the decisions you made when you were younger. Would you make the same decisions again if you knew then what you know now? Probably not. Thus, it makes sense for many clients to leave an inheritance for a child in trust until a certain age when they may be in position to make a better decision about the use of funds.
9. You have a family member who is just not good with money. Is your son (or, for that matter, his spouse) a bit of a spendthrift? Is your youngest still trying “find” herself? You might want to provide some sort of management for that beneficiary’s share of your estate.
10. You have a child or grandchild with a disability. Are they receiving public benefits like Supplemental Security Income (SSI) or Medicaid? You may need to create a special needs trust for any share they will receive. Are they not on public benefits right now? You probably still want to consider a special needs trust, because you don’t know how things will change over time. The same rules apply for any person you plan to leave money to, including your long-time housekeeper’s son or the young woman who grew up with your kids and was treated like a member of the family. We just use “child or grandchild” because they are the most common recipients.
Do any of these reasons resonate with you? If so, talk to your lawyer about the benefits of having a trust(s) as part of your estate plan.
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