Do You Need a Trust?

May 29, 2024 | Trust Administration

One of the first questions many of my clients ask is whether they need a trust. It’s a great question, but it leads to another: What do you want your estate plan to accomplish? First I will explain what trusts are and how they work. Then I will look at the benefits of a trust based plan so you will have a better idea of whether a trust is right for you and your family.

There are many different types of trusts and they can accomplish a wide range of goals. However, when most people think about trusts, the one they have in mind is a Revocable or Living Trust.

A trust is a separate legal entity that is established by a trust agreement.  The grantor is the person who creates and signs the trust agreement.  The trust agreement sets forth the rules and guidelines the trustee must follow when managing the assets whether it is during the grantor’s incapacity or upon the death of the grantor.

After signing the trust agreement, the grantor’s assets are funded into the trust.  Assets that may be funded into the trust include, but are not limited to, real property, financial accounts, motor vehicles and other items.  An example of trust funding is recording a deed moving the ownership of a house from the grantor’s name into the name of the trust.  After assets are transferred into the name of the trust, the trust technically owns the assets; however the grantor can continue to use them as he or she normally would.

When the trust is created, the grantor names a trustee to manage the assets funded into the name of the trust.  Most grantors name themselves as the initial trustee, giving them complete control over the trust’s assets. A  successor trustee is also named to take over management of the trust upon the grantor’s incapacity and death.

One of the primary benefits of a trust is that it enables assets held in the trust to avoid the probate process after the grantor’s death thereby avoiding the costs associated with probating the estate. The grantor can stipulate when, how, and under what circumstances the successor trustee is authorized to distribute trust assets to beneficiaries. This is particularly important if the beneficiaries are not yet mature enough to manage an inheritance on their own, or in situations involving blended families.

Additionally a trust protects the privacy of the grantor (and beneficiaries) because the trust’s provisions are confidential. Once a person’s Last Will and Testament is submitted to the probate process, it is a matter of public record. Anyone can access information about the decedent’s assets, creditors, debts, and more.

Trusts can also be used to protect the grantor and the grantor’s family from a stressful and expensive guardianship (day-to-day decisions) proceeding or conservator (financial) proceeding if the grantor becomes incapacitated.  The probate court treats the appointment of a guardian and the appointment of a conservator as two separate lawsuits, each with their own rules.

As mentioned earlier, there are many different types of trusts. If one of your primary goals is to protect assets from long-term care costs, creditors, lawsuits, and other threats, an Irrevocable Trust or an Asset Protection Trust may be a much better option then a Revocable Living Trust. If you have a loved one with special needs, a Special Needs Trust can allow you to create a fund for goods and services not provided by Medicaid or Supplemental Security Income while protecting eligibility for these vital programs.

These are but a few examples of various trusts and what they can accomplish. If you’re still not sure whether you need a trust, we welcome the opportunity to explain your options in detail and, if appropriate in your particular circumstances, design and implement the trust that’s right for you and your family.  Contact Duncan Legal, PC to schedule a consultation.  Your peace of mind is our priority and we look forward to assisting you on your estate planning journey.

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