Should I Create A Trust?

TRUSTS are not just for the rich and famous – they are a very helpful tool in making sure your wealth goes where you want and is used how you want. That said, they do come with costs to set up so at what point is it worth considering creating a trust as part of your estate planning?

A rough guide is if you are leaving at least $100,000 of wealth – especially if it is in property – or you have very specific wishes on how your assets are to be distributed and used, then a trust may well be worth thinking about. Trusts also have good features in helping minimize estate taxes and protecting assets from creditors or lawsuits. But they do need to be set up properly and legal advice is a good idea to make sure they work for you the way you want them to – there are different types with different implications for you and your heirs.

Trusts are a legal entity that allow you to put conditions on how assets are distributed after your death, and if you put assets into them, they avoid going through the probate process. But the assets must be titled and transferred into the estate for this to happen.

The two basic types of trust are Revocable and Irrevocable, but there are lots of variants that can do very specific things – all the more reason to seek expert advice when setting one up. A Revocable trust does as the name implies – it leaves you in charge of the trust and you can change the rules at any time, but trust assets are subject to estate taxes. And by the same reasoning, an Irrevocable trust is locked – you have given the assets to the trust and any changes usually have to be approved by the beneficiary, but trust assets avoid estate taxes.

Variants of trusts can help shelter family wealth, or skip generations, or help distribute life insurance payouts, or handle property - especially useful when blended families exist and you want to ensure a spouse gets to stay in their home but also ensure children from a previous marriage are able to inherit as well.

As you can see, the types and terms of trusts can get complicated quickly, and should be set up with an experienced estate planning attorney who can advise you on the benefits and pitfalls of different solutions, and how they play a part in your whole estate plan – including your will, which will govern everything else in your estate.

As each state has differing laws, and as laws also change over time, it is also worth reviewing your trust set up every few years with your lawyer to make sure they are still working for you the way you intend.

Not sure if you might benefit from a trust in your estate planning? Give the team at RM Nelson Law a call today to see if we can help you help your loved ones.