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Do I Need a Trust?

Do I Need a Trust?

February 07, 2022

If you are like many of my clients, from time to time, you get to feeling that maybe you need a trust. Typically, this feeling is the result of something you saw on cable, read in a book or article, or perhaps advice from a neighbor or friend.

Exploring the Need for a Revocable Trust

Of course, not everyone NEEDS a revocable trust. For some people, a revocable living trust can be very helpful in reaching some goals. 

Here are six situations in which a revocable trust might be helpful for your family.

Key Situations Where a Revocable Trust is Beneficial

PROBATE AVOIDANCE

One popular use of revocable trusts is to help avoid probate. This is because, upon death, the trust will dictate how assets in, or payable to, the trust will pass. In many states, the probate process is time-consuming and expensive. This makes probate avoidance very appealing. Remember a trust is not the only way to avoid probate. Families should consider joint accounts, beneficiary designations, and transfer-on-death accounts, too. A revocable trust is a method that can avoid probate and provide additional benefits.

IF YOU OWN LAND IN MORE THAN ONE STATE

Avoiding probate becomes even more important for families who own real estate in more than one state. Often a separate probate is needed in each state. Sometimes this means hiring another set of estate attorneys licensed in each state where the property is held. Typically, the cost of creating the revocable trust, and having a deed prepared to transfer ownership of the real estate to the trust, is less expensive than the cost of probate in each state.

PRIVACY CONCERNS

Many clients, especially those who live in small towns, feel strongly that they want to keep their business affairs private. Many people know that when wills are filed with the court upon death, they become public record. Revocable trusts, on the other hand, remain private Many families find the privacy argument compelling. They do not want their friends and neighbors — nor any relatives who are not provided for in the estate — to learn about either the extent or disposition of their assets.

SECOND MARRIAGES and BLENDED FAMILIES

When married couples have children from previous marriages or relationships and both parties leave all their assets to each other, the surviving spouse has the ability to disinherit the stepchildren. A revocable trust can remedy this situation—providing lifetime benefits to the surviving spouse and, after his death, sending the remaining assets to children.

PLANNING FOR BUSINESS CONTINUITY

A revocable trust allows a co-trustee or a successor trustee to have unrestricted access to assets, in the event of incapacity of the grantor of the trust. This means you can identify someone to run the family business if you are not able. If a family uses a will instead, there is no provision in case the business owner is incapacitated and not dead. In this case, the family will need to have a court appoint someone to act on the owner’s behalf. This process can take time and will require attorney’s fees. If you die with a will as your primary estate vehicle, the probate court would need to name a Personal Representative for the business interests, which can take several weeks or even several months to accomplish. In addition, the Personal Representative will most likely need approval of the probate court to continue to run the business beyond a few months after you die. A revocable trust allows the successor trustee to act on your behalf and for business to continue without interruption. Even so, a durable power of attorney may still be necessary for other reasons — signing admission papers to a hospital or nursing home, dealing with insurance companies, or managing retirement accounts, for instance.

SPECIAL NEEDS

In addition to planning for their own care, many clients seek a careful approach to providing for loved ones with special care needs. For example, when a person receives government assistance due to a disability, a gift or inheritance might result in the denial of benefits. However, assets can be left in certain trusts to provide for supplemental needs, allowing the disabled person to continue to receive benefits.

I am not an attorney. And I do not provide legal advice. I do work with clients to help them understand when they might want to meet with an experienced estate attorney to consider a trust for their family. I also have great working relationships with several estate planning professionals to whom I sometimes make referrals. 

You may find that thinking about a trust has you wondering about other aspects of your financial plan. For example, you might wonder if you need help coordinating your retirement income plan and your estate plan. If you are wondering about your financial game plan and how a trust might fit in the mix, I would be happy to talk thing through with you. An initial conversation is always free, and I always try to be as helpful as I can in that first conversation.

If you would like to talk with me, follow this LINK to find a time for us to visit.

Yes, I am a CFP® professional. I’m always a fiduciary and I work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.

If this article has you thinking about your own circumstances, contact my office at rdunn@dunncreekadvisors.com. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.