One of the most common question I get asked by estate planning clients is “Do I need a Trust?” The answer I usually give to that question is “It depends.” In many cases establishing a trust is the best way to accomplish your estate planning goals. However, in some cases a trust may not be necessary. In any case, it’s important to consider your individual circumstances when considering whether a trust should be included in your estate plan.
There are several specific purposes that can be accomplished by creating a trust. Here a just a few:
If you create a trust and transfer assets to the trust during your lifetime, those assets are generally not subject to the jurisdiction of the probate court after you die. There can be advantages to avoiding probate, such as greater privacy, lower costs, and less delay in transferring assets to beneficiaries. In cases where real property is located in multiple states, a trust can be useful in avoiding probate in two or more states, potentially saving thousands of dollars.
A trust can be a useful tool to provide for management of assets during your lifetime and after death. In the situation where a person no longer has the ability to manage their own affairs, a successor trustee can step in and manage the assets held in the trust. Similarly, when a person dies, the successor trustee steps in to manage the assets according to the terms of the trust. This can make things much easier for the family if there is a successor trustee who can quickly take over the management of the person’s assets if necessary.
A trust can provide for greater flexibility in your estate plan. For example, a trust can provide that the assets are held and managed for many years after death. Distributions to beneficiaries can be delayed or spread out over a number of years, or based on certain conditions. It may be important to hold a disabled child’s inheritance in trust in order to qualify for government benefits. These are all things that generally cannot be accomplished using a simple will.
While there are many reasons why a trust may be appropriate to include in an estate plan, there are some instances where it may not be the best option.
If the only reason you have to create a trust is to avoid probate, that goal can often be accomplished without a trust. Almost all financial accounts allow for payable on death (POD) or transfer on death (TOD) designations, or joint & survivorship, which allow the assets to pass directly to the beneficiary upon death, outside probate. Ohio law even provides that a transfer on death designation may be included on the title to real estate, which is done by signing and recording an affidavit.
Establishing and funding a trust is generally more costly and time consuming than a simple will. In the case of a young person or couple with few assets, a simple will can normally accomplish that person’s estate planning goals in a more cost-effective way. For example, a couple with young children may be most concerned with naming a guardian to care for the children, and less concerned with avoiding probate.
The answer to the question “Do I need a trust?” is “It depends.” The answer for you may be different than for your neighbor or co-worker. To find out the answer, it’s important to consider your individual financial and family situation, and to get the advice of an experienced estate planning attorney.
Rob Bolin is an Oxford, Ohio estate planning attorney and Board Certified Specialist in Estate Planning, Trust & Probate Law by the Ohio State Bar Association. He welcomes inquiries from new clients.
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