Do I Even Need a Trust?

We at Meridian often get a lot of questions around trusts and what they can and can’t do. While we are not attorneys and do not draft wills or trusts, we do need to be aware of what estate planning options are available to our clients. “Do I even need a trust?” is probably the most common question. From a pure save-money-on-taxes perspective, the answer is likely ‘no.’ Under current estate tax rules, unless you have an estate (plus taxable gifts) valued over $11,580,000 (twice that for married couples) then there is no estate tax. Note that estate tax rules do change often, so keep that in mind and make sure you are updating your documents accordingly.

 

Even though you may not have a taxable estate, planning for distribution of assets after death is important. And, a living trust can make that process easier for your beneficiaries. At the very least, everyone should have a will that spells out who gets what, and it is often helpful to inform both beneficiaries and the executor (or executrix) of your plans and reasoning. This can help avoid conflict and confusion down the road. Creating a living trust can make the transition of assets to the next generation much more efficient, maintain privacy, and possibly save money.

 

Efficiency

 

A living trust avoids probate, which is the process of the courts getting involved to make sure an estate is properly settled. From Michelle Kaminsky, Esq. at LegalZoom, “A living trust does not go through probate, which often means a faster distribution of assets to your heirs – from months or years with a will down to weeks with a living trust.”

 

Privacy

 

Believe it or not, a will is public record once you pass, so anyone who wants to can see what is in a will and the transactions that occur. A trust on the other hand, remains private, so no one other than the trustee can see assets in the trust as well as affect distributions.

 

Saving Money

 

While there are costs to having a living trust drafted, it can save you and your heirs money later. Again, from Michelle Kaminsky, Esq., “While a will costs less to draft, a living trust can save your estate money at the time of your death as the distribution of assets in the trust will not go through probate…” and incur potential fees.

 

While you are alive, you are the trustee of the living trust. You transfer all of your assets (home, cars, stocks/bonds, etc.) into the name of your trust. All assets remain under your control until you die, at which point your appointed trustee takes over. A trustee can be anyone that you…well…trust. Usually it’s an adult child, a bank or trust company, or sometimes an attorney. The trustee is the person or entity who will carry out your wishes as explained in the trust document.

 

If the trust document states that all assets are to be paid out after death, then the trustee will make sure that happens. In some cases, assets are retained in a trust for many years for future use, and the trustee will be tasked with making sure those assets are invested and grow appropriately. There are a many reasons why assets remain in a trust, but I would say the most common is for a young child or adult’s future use. Many parents don’t want young children/adults left with a large lump sum of money that might be spent irresponsibly, so they will ask that the trust hold the money until they reach a certain age or only pay them smaller amounts over time. For what it’s worth, this is where the term “Trust Fund Baby” comes from. It refers to a person who is the beneficiary of a trust, receives some sort of large monthly payout, and really doesn’t have to work for a living!

 

You can imagine all of the interesting reasons why people leave money in trusts. As we say, you can instruct anything you want in a trust as long as it’s legal! One of my favorites was a “matching clause,” where the beneficiaries would receive an annual amount that matched what they were able to earn on their own. A noble attempt to prevent children from becoming Trust Fund Babies!

 

I don’t have a clever tie-in for an excuse to post a cute dog picture this week. Although, maybe I will set aside some money for a dog trust! 😊 Here’s our French Bulldog, Daisy sleeping under the Christmas tree!

 

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Do I Even Need a Trust?

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