If you’re putting thought into the best estate planning solution for your assets, you may have considered forming a Trust for your children and/or grandchildren. A Trust can be a great option to protect your intentions for your estate, while providing for your family. However, a Trust is not always the best solution for every estate plan. Consider the following pros and cons of setting up a Trust for your heirs:
There are several different types of Trusts including Revocable Trusts, Irrevocable Trusts, and Special Needs Trusts. The main difference between a Revocable Trust and an Irrevocable Trust is the grantor is also the Trustee and primary beneficiary, retaining ownership of their assets. When forming an Irrevocable Trust, the primary beneficiary is a third party, such as the children, effectively transferring ownership of their assets to the third party. Special needs Trusts can be created to provide for an heir who is physically or mentally disabled without the funds affecting their eligibility for social security disability benefits.
When you create a Trust, you can place certain conditions that your heirs must meet in order to inherit assets from the Trust. Conditions cannot require a beneficiary to break the law or go against public policy.
Creating a Trust requires the grantor to transfer ownership of the assets and funding the Trust. As such, there can be significant asset protection advantages to choosing this type of Trust thereby protecting certain assets from creditors.
Assets in a Trust do not have to go through probate because the assets were already distributed when the Trust was funded.
As mentioned above, while there can be benefits to creating a Trust, you do have to transfer your assets into the name of the Trust. And, depending on the type of Trust you choose, although you may maintain control, you may not technically maintain ownership of the assets. This is why it is important to seek the assistance of an Attorney when considering a Trust.
There are many details involved in forming a Trust—one of the most important of which is funding the Trust. It is not uncommon for individuals to devote time and money to creating a Trust with conditions that reflect their wishes, yet fail to fund the Trust. If an asset is not in the Trust, then the Trustee has no authority over it and that asset will be distributed according to the Will of the deceased owner or according to the intestacy laws in the state where the estate is probated.
The legal fees and accounting fees involved in creating a Trust can vary widely depending on who you hire, the extent of your assets, and the complexity of the Trust you are creating. However, generally there are even more financial incentives to creating a Trust, due to the asset protection a Trust can provide and the elimination of the need to go through the Probate process.
If you are wondering if forming a Trust is the best choice for your estate plan, contact our law office and our experienced estate planning lawyers can advise you on the best solutions for you and your family.