SanGenLife

When I talk to my clients about the benefits of a trust as part of their estate plan, their eyes glaze over. Trusts seem overly complicated and only applicable to the super-rich. However, there are several significant benefits to include a trust in your estate plan.

A trust is a tool to take assets out of your name (which would otherwise be held up in probate and may be subject to fees and taxation) and put it in the name of a trust. You retitle your personal property (real property and tangible and intangible property) into the name of the trust and the trust is now the owner of the property.

Many people have the misconception that property or assets in a trust are not accessible. You can set up a trust where you are the beneficiary and draw money out for your care and support.

Setting up a trust has significant advantages. It will reduce the assets held in your name, thus reducing the value of your estate. The assets placed in the trust do not go through probate. Instead, the property in the trust benefits the trust beneficiaries you designate.

There are other 9 key benefits to a trust

EASE OF ADMINISTRATION

With a trust, no probate administration is needed other than filing an administrative form along with the will. Your trustee handles your debts and your bequests in the same way a personal representative does. The trustee does not need to report to the probate court. This cuts down the time of estate administration to weeks, not months or years. Therefore, your heirs will be able to receive your assets and property without delay.

SIGNIFICANT SAVINGS ON ATTORNEY FEES AND PROBATE COSTS

Once you take assets out of your name, you reduce the size of your estate. Therefore, there is less to go through probate administration, saving you probate court fees. You will also save money on fees mandated by the state that a probate attorney may charge for representing your estate in probate court.

According to California Probate Code Section 10800, for an estate valued at $500,000, the statutory attorney fee is $13,000. In Florida, under Section 733.6171, the statutory attorney fee for a $500,000 estate is $15,000. These fees do not include any costs for the probate court itself or executor fees. Fees and costs vary from state to state.

AVOIDING PROBATE IN SEVERAL STATES

Your estate will have to file probate in any state that you own property. If you live in New York and own a condo in Florida, your personal representative will have to file two estate administrations, one in New York probate court and one Florida probate court. That means your estate will have to retain an attorney for each state and pay fees to each court. A trust avoids probate, so the property in your trust can be sold or distributed to your heirs without having to go through multiple probate administrations. So, in the above example, you would set up a revocable trust and transfer ownership of the Florida condo from your name to the name of the trust as the owner. This is done with a simple deed transfer. The trust would own the Florida condo. You will no longer have to go through probate in Florida.

PROTECTION IF YOU BECOME INCAPACITATED

If you become incapacitated and could no longer manage your affairs, your family will have to petition the court for a conservatorship. A conservatorship gives them legal authority to handle your affairs for your benefit.

Conservator – A person appointed by a judge to manage the affairs of another who is incapacitated. A conservator of the estate manages the finances and a conservator of the person handles medical and personal decisions. The definitions and titles vary from state to state.

Getting a conservatorship is a lengthy process and can be expensive. Your family will have to pay court costs, attorney fees, and on-going fees for court supervision. The petition could be challenged by a family member who does not agree with the conservator.

With a trust, you have already designated the trustee(s) who will handle your affairs. They will not have to go to court and have a hearing on your capacity. Instead, the trustee needs one or more physicians to certify in writing that you are truly unable to manage your affairs before taking them over. The required number of physicians is defined in your trust document. During your incapacity, the trustee handles your estate for your benefit, and upon your death, the trustee will follow your instructions for the distribution of your trust property. Your trustees are held to a fiduciary standard as to act in your best interests.

PROTECTION FOR SPOUSE IN SECOND MARRIAGES

If you do not have a prenuptial agreement to address who receives your estate once you die, a trust could be set up to provide income to the surviving spouse yet control and preserve assets for the children of a previous marriage. There are many ways to address this, so it is best to consult an attorney for your particular situation.

EASIER ACCESS FOR YOUR MINOR CHILDREN

If you leave property or assets to a minor child, they cannot manage it. A court-appointed guardian will handle those assets and is obligated to make accounting reports to the court. If you have a trust, you designate who you want as the trustee of the trust. Your trustee manages the assets and provides them to the minor child for their care and necessary expenses.

KEEPING MONEY IN THE FAMILY

If you leave your child an inheritance and your child deposits it in their joint bank account with his or her spouse, it becomes joint property. While you may cherish your relationship with your daughter-in-law or son-in-law, you might feel differently if your child divorced them. Setting up a trust can benefit your child and your grandchildren so long as your child keeps those assets in the trust or separately in their name and designates your grandchildren as beneficiaries (not the spouse).

PROTECTION FOR YOUR CHILDREN

You may be concerned if you have a child who cannot manage money or has a drug or alcohol problem. If you leave your child an inheritance, they can spend it on anything they want, and what they inherit can be subject to their creditors’ claims. If you set up a trust to benefit your child, your trustee will manage the money for the benefit of your child. You can make sure the money will help your child without being squandered.

• If you have a child or dependent with special needs, they may currently receive disability payments from the government. There is a way to provide for them after your death without jeopardizing what they receive in entitlements. A Special Needs Trust allows you to leave property to the trust for their benefit. They do not own, nor can they control the trust property. So instead of you leaving them property in your will, the Special Needs Trust is named as the beneficiary and holds that property for their benefit. You designate a trustee to manage the property and provide incidental support to your child or dependent under special rules to avoid endangering governmental assistance.

PRIVACY

Finally, a trust keeps the details of your estate private. A will is recorded and made a public record in probate court. A trust rarely becomes public. If you don’t want people to know what you have and who you are giving it to, consider a trust. Many celebrities and high-profile people set up trusts to keep their affairs private – you can too!

In Conclusion

As you can see there are many benefits to adding a trust to your estate plan. Depending on the type of trust you set up, you are still able to use, benefit from, sell, or dispose of those assets as you normally would.

Think of a trust as a corporation. A corporation holds assets in the corporate name, but it is for the benefit of the owners of the corporation. The owners of the corporation can buy and sell the assets and make all decisions about the assets, even though the assets are not in the owners’ names. Once the corporation dissolves, the assets go to the owners or beneficiaries of the owners.

Don’t fool yourself by thinking trust are too complicated or expensive. Make an appointment with an estate planning attorney to discuss the benefits of a trust and if it is right for you.

Parts of this article have been excerpted from Estate Planning for the Sandwich Generation: How to Help Your Parents and Protect Your Kids.

Need more tips to help your family? Get the #1 Amazon Bestseller in new releases for Wills/Estates Estate Planning for the Sandwich Generation: How to Help Your Parents and Protect Your Kids today.