People regularly ask me whether they should have a Trust, or “just” a Will.  The answer is:  “It depends.”  First, let’s start with some definitions.

What Is a Will?

Most people have a general understanding of a Will.  In short, it lays out instructions for the distribution of property upon the owner’s death, names a personal representative to make sure the instructions are carried out, and (if applicable) names a guardian and conservator to take care of minor children and their assets.  A Will governs all property that is owned by a deceased individual – unless that property has a joint owner, a beneficiary designation, or is held subject to a contract (such as a Trust).

What Is a Trust?

A Trust is a contract – initially between the person setting up the Trust (the “Settlor”) and the same person as Trustee.  Upon the Settlor’s death or disability, a successor Trustee takes over to manage and distribute the Trust’s assets as directed by the Trust Agreement.

Who Should Have a Trust?

There are many good reasons for setting up a Trust.  In my experience, most people with a Trust were motivated by one (or more) of the following goals:

  • Probate Avoidance – Probate is a “scary” word, but the process and procedures have been simplified over the years. The costs of probate can vary drastically depending on the value of the assets that are being overseen by the Probate Court.  Assets owned by a Trust are not subject to probate.
  • Privacy Concerns – Probate pleadings are public records; Trusts are private. Without a Trust, “nosey neighbors” and business competitors can view your probate pleadings, including the Inventory of your assets.
  • The Desire to “Control from the Grave” – Many people desire to either delay distributions to beneficiaries (especially when the beneficiaries are minor children) or protect assets from claims of the beneficiary’s creditors. With proper planning, these goals can be achieved through a Trust.
  • Reduction of Estate Taxes – The current estate tax rules are very taxpayer friendly – exempting the first $5.45 million in assets transferred upon death by a single individual or $10.9 million for a married couple (for calendar year 2016). If, however, your assets are approaching or exceed these threshold amounts, certain Trusts can provide additional estate tax benefits.
  • Planning for Special Needs – If your beneficiaries are receiving government benefits that would be impacted by an inheritance, it may be possible to avoid unintended consequences through the use of a “Special Needs Trust.” A Special Needs Trust provides for the beneficiary’s discretionary needs in a manner that is intended to avoid disqualification from government benefit programs.

What’s the Bottom Line?

Each person’s goals are different when it comes to estate planning.  While a Trust may be very beneficial for some individuals, for others the added cost of a Trust may not be justified.  Please contact Thomas S. Flickinger or another member of the Rhoades McKee Estate Planning Group for a free initial consultation to review your estate planning goals and determine if a Trust is right for you.

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