Estate Planning is actually you planning. It’s not me planning or one size fits all planning. Its based on what you and your family want and need. Trusts are a common planning tool. Trusts sounds super fancy don’t they? They must be for the wealthy and rich right? And what the heck is a trust anyway? All good questions. Trusts can be the proper tool a lot of different in situations.
A trust is like a chest. You can add things to the chest, and keep things safe. Today we are going to talk about revocable trusts, which means that you can take out what you need when you need it.
There are benefits to a trust over a will in estate planning. First, trusts avoid probate. After you die, your will or estate (if you do not have a trust) is probated. The world can see your will, it is no longer a private document. Trusts are always private. Your estate will then be subject to a series of estate tax and fees, and your executor or personal representative will take care of it. This might not be a big deal, as you have passed away at this point. However, your spouse may still be alive. It will also take time and money away from your beneficiaries. Other considerations are if you have business interests, additional properties, complex financial situation or a a family member with an addiction problem, in a contentious marriage or pending divorce, or may not make the best financial decisions (spendthrift).
With a trust, your plan is in place on day one. You are in charge of your estate, your beneficiaries, who your trustees are, what will happen if you become incapacitated and can do additional tax planning. Now in a will, you can do similar tax planning as well, and create trusts that will be created upon your death (testamentary trusts as opposed to inter vivos trusts – during life). Both trusts and a will can name guardians for your minor children, and create trusts for them upon your death.
If you have a blended family, a trust is a great way to ensure that your spouse and children from all the relationships are provided for after your death. There is much more control in a trust than a will, which can be contested.
The main drawback to a trust is the upfront cost. A will typically costs less to put in place than a trust, but will have additional costs at death with probate. A trust will cost more to draft and to fund, but you avoid the cost of probate. A properly funded trust is key to avoiding probate which means that all real property, bank accounts and financial accounts must be placed in the trust and re-titled properly. Essentially, a trust ensures that all of your wishes are taken care of while you are alive and your plan is followed per your directions when you pass.
Contact Erin Saulino, Esq. with any questions or to discuss you planning.