Although many people equate “estate planning” with having a will, there are many advantages to having a trust rather than a will as the centerpiece of your estate plan. While there are other estate planning tools (such as joint tenancy, transfer on death, beneficiary designations, to name a few), only a trust provides comprehensive management of your property in the event you can’t make financial decisions for yourself due to incapacity or after death.
One of the primary advantages of having a trust is that it provides the ability to bypass the publicity, time, and expense of probate. Probate is the legal process by which a court decides the rightful heirs and distribution of assets of a deceased person through the administration of the estate. This process can easily cost thousands of dollars and take more than a year to resolve. Not all assets are subject to probate. Jointly owned assets with rights of survivorship and assets with designated beneficiaries or “payable upon death” do not provide the ability for someone you trust to manage the assets if you’re unable to do so and also may have less favorable tax implications. They are incomplete solutions.
If your probate estate is less than $50,000, you may qualify for a simplified probate process. If greater than $50,000, you should consider creating a trust as it will likely save both time and money in the long run. Beyond the cost and time of probate, this court proceeding creates a public record of your assets and how they were distributed. A trust, on the other hand, creates privacy for your personal matters as it can typically be handled outside the courthouse and may reduce conflicts or potential legal challenges.
Another common reason to create a trust is to provide security that your assets will be managed in the way in which you direct, and not be subject to mandatory liquidation to cover the costs of end of life medical care. Through a trust, you can designate someone to manage the assets and distribute them to your heirs under the terms you provide. A trust can also come with conditions that must be met for a beneficiary to receive the benefit of the gift protecting against i) loss due to divorce, ii) disqualification from receiving some form of government benefits, iii) enabling and funding an addiction, or iv) encouraging irresponsible behavior that you don’t find desirable.
In summary, trusts are not simply just about avoiding probate. Creating a trust can give you privacy, provide ongoing financial security and support for loved ones, and protect you and your property. Simply put, the creation of a trust puts you in the driver’s seat when it comes to your assets and your wishes as opposed to leaving this critical life decision to others, like a judge. To learn more about trusts, and estate planning in general, contact us today to start a plan that best fits your needs. We are here for you