Should I Have a Trust in My Estate Plan?

Should I Have a Trust in My Estate Plan
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A simple will works for some people, but maybe not for you. Are you in a second marriage? Have minor children? Are you concerned about fraud? These are just a few of the many reasons to consider a trust.

Kiplinger’s recent article entitled “Why Do I Need a Trust?” says that if having assets distributed outright to a beneficiary could cause potential issues, think about creating a trust.

If you prefer to place specific conditions on the funds, you should have a trust.  Distributions can only occur at future ages, like a third of the inheritance at age 30, half at 35, and the remainder at 40.

Trusts can be significant in second marriages if one spouse wants to leave their assets to their children rather than their stepchildren.

If your job has a high risk of liability, having assets passed down in trust (once the trust becomes irrevocable) may protect assets from being attached in a lawsuit. This can be very specific concerning state law and the type of lawsuit, so talk to an experienced estate planning attorney before making any decisions.

For large estates that are expected to grow, creating trusts during your lifetime and gifting assets can remove the growth from your estate and lower future estate taxes. Remember that revocable (or living) trusts become irrevocable on your passing, so anything in the revocable trust will not be in the beneficiary’s estate.

You may need to use a trust if you have several beneficiaries and want to specify who gets what or unequal proportions. It can also get complicated if you leave one beneficiary a specific amount instead of a percentage.

Trusts are essential when minor children are involved. That is because you will need a legal guardian for the child, who may also be in charge of the funds. Since minors can’t own assets outright, you must ensure the funds are protected. You should specify your intentions for the funds and the conditions, so the child (or the guardian) can’t be frivolous with the funds.

Suppose you intend to provide for grandchildren upon your passing, or you worry about the parents keeping the inheritance funds for their children. In that case, a trust for the grandchildren (or future grandchildren) is an option to guarantee the funds will trickle down.

Talk to an experienced estate planning attorney about your circumstances and your intentions, so they can direct you on how to protect your assets and your wishes.

Reference: Kiplinger (August 12, 2022) “Why Do I Need a Trust?”