You do not have to have a lot of money or assets in order to benefit from the use of trusts, according to Barron’s in “Why a Trust is a Great Estate Planning Tool – Even if You’re Not Rich.”
Many people want to try to avoid probate, the legal process by which a will is deemed to be valid. The problem of probate is that, in some states, it can take a long time, and court fees can mount up quickly. Depending on where you live and how complex your estate is, it could potentially add about 5% to the value of your estate.
There are a number of ways to avoid probate, including owning property jointly, using payable-on-death (POD) accounts, or payable-on-death transfers. Many people use trusts to solve this problem. An estate planning attorney will review assets and determine which ones should be assigned to the trust. Some people chose to put all their assets subject to probate into the trust. That may include brokerage accounts and real estate, jewelry, art collections and other valuables.
Retirement accounts, insurance policies and any other assets with beneficiaries are not included in the trust, because they do not go through probate.
The revocable trust allows you to control the trust, including making changes or revoking it completely.
There is a trade-off, however. Since the trust is considered part of your estate, it does not offer tax benefits or asset protection. An irrevocable trust is used by estate planning attorneys to remove assets from the estate, but they are difficult to change or cancel.
Another benefit of a trust is to provide you with clarity and control.
In families with special needs individuals, a Special Needs Trust is used to protect an individual’s ability to receive government benefits. Special Needs Trusts are designed so that disbursements can take place to cover costs for health or comfort that may not be paid for by Social Security, Medicare or other government benefit programs.
In blended families, trusts clarify which assets should go to a surviving spouse and which should go to the children of a first, second or even third marriage.
An estate planning attorney can advise you in creating an estate plan that fits your specific circumstances and may include the use of trusts.
Reference: Barron’s (Feb. 23, 2019) “Why a Trust is a Great Estate Planning Tool – Even if You’re Not Rich”