Many of our clients ask whether they should incorporate a trust into their estate plan. They typically hear from friends or family that having a will is not enough; they’re often told that a more robust estate plan includes a trust even though they may be unclear of how one might actually benefit them.
There are several different kinds of trusts, each one offering its own advantages (and sometimes disadvantages). Rather than identify the different kinds of trusts and how they work, the most important thing we recommend is to understand why and when you need one. To that end, we highlight the standard benefits that come with implementing any kind of trust, no matter which type is created.
When a person passes away with property titled in their name alone, someone must be legally appointed by the probate court to act as the executor or administrator of their estate, for purposes of re-titling that property in the names of the deceased’s beneficiary(ies).
However, when a person transfers ownership of their property to a trust during their lifetime, probate court intervention is not necessary upon their passing. This is because their trust survives them as a still-existing legal entity. Most commonly, another family member is designated as that person’s successor trustee━someone who is empowered to transition the property held in trust to whomever the trust names as the beneficiary. If the successor trustee is tasked with selling the deceased’s real estate, this can be done far quicker when there is no probate.
In most cases, the additional cost of including a trust in one’s estate plan is significantly less than the amount of time and expense incurred by the person’s heirs during a probate court administration.
Family dynamics are usually complex. There is only so much planning one can do within the confines of an ordinary last will and testament (or “will”, for short). A trust is a more flexible vehicle for nuanced estate planning, such as when clients wish to leave inheritance to children with “strings attached.” Because trusts are actual standalone legal entities, they can provide for fluid, ongoing arrangements that survive into the future, after one’s death.
Example: Establishing Conditions for Inheritance
Clients usually stipulate within their trust that if, at the time of their passing, their child becomes entitled to inheritance, but the child has not yet reached the age of 30, that inheritance is to be retained in trust and managed by an older, more responsible family member (or other confidant) until the child reaches 30. Within a trust, this arrangement takes place privately, between child and trustee, without the time, expense, oversight, and burden of the probate court.
This is just one example of the kind of “family planning” one can engage in more efficiently through a trust.
A common estate planning misnomer is that only wealthy clients need trusts. Leaving aside the relativity of wealth, simply having “lots of stuff” often makes a trust a key part of one’s estate plan.
We often encounter clients with bank accounts, stocks, bonds, and other assets scattered across multiple financial institutions. What seems like financial diversity during one person’s lifetime becomes another person’s burden when it comes time to gather and liquidate these assets post-death. Rounding up all of these assets during life and containing them within a trust goes a long way toward easing the administrative burden on a person’s heirs.
In consultations with clients, we usually begin by discussing these “baseline” trust benefits, because no matter what one’s larger estate planning goal is – i.e., reduction in taxes, nursing home asset protection, etc. – these “smaller,” more basic benefits also matter a great deal.
Explore Your Trust Options
Considering a trust? The estate planning attorneys at Pelletier Marshall & Clark are ready to help. We implement basic and advanced trusts for clients in Rhode Island, Massachusetts, and Connecticut. Contact us for a free, no-pressure consultation of your estate planning options.
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