Many people think of Trusts as only being necessary for people with sizeable estates, but Trusts can be useful for people of all means. A properly drafted Trust allows your family to save time and hassle with probate, preserves privacy about your property, and allows for an easy and smooth transition of your property to another to manage either after your death or incapacity. It can also be critical for managing money for minor children or any beneficiary that may need assistance managing money.
A Revocable Trust is a legal document that appoints a Trustee to hold and manage assets. The Grantor is the person that makes the Trust. The Trustee and Grantor can be and often are, the same person. With a Revocable Trust, the Grantor has the ability to revise the Trust until death or incapacity, allowing for a great degree of flexibility to address changes in family circumstances. The Trust should specify who will take over as successor Trustee when the original Trustee dies or is incapacitated. This allows for a seamless transition of management of your property, either while you are still alive but in need of assistance in managing your property, or after your death. In this way, Trusts are an effective strategy for planning for future incapacity.
A Revocable Trust can speed up or even eliminate the probate process after your death, saving your family headaches, time, and money after you are gone. Probate is only required for assets held in your individual name at death. If your house, bank accounts, cars, and all property is in a Trust, then nothing has to go through probate—the successor Trustee merely takes over managing the property and either continues to manage or distributes to the beneficiaries as directed in the Trust.
If you have minor children, Trusts allow for a Trustee to manage your children’s money for them until they reach an appropriate age. As minors cannot inherit, Trusts are critical when there are minor children to avoid the need for a court appointed guardian to manage your children’s money. If a guardian is required, the guardian has to account to the court for how all money is spent, and may even need to seek approval from the court for expenditures. Even if you try to avoid the need for a guardianship by setting up a custodial account under the Uniform Transfers to Minors Act (UTMA), the law dictates that the minor takes control of the account at the age of 18, an age that many parents may feel is not yet mature enough to make prudent financial decisions. You know your children best, and a Trust allows you to choose the age you think your children will be mature enough to manage their finances. Similarly, Trusts are also a great option whenever there is a beneficiary that needs assistance with managing money.
Unlike a Revocable Trust, an Irrevocable Trust is a Trust that cannot be revoked by the Grantor after it is established, and generally cannot be amended. Common reasons for considering an Irrevocable Trust are for Medicaid planning for future nursing home care, tax savings, and creditor protection.
Our experienced estate planning attorneys will listen to your needs and unique circumstances, and guide you through the process of deciding whether a Trust is the right choice for you.