What About a Trust?

By Jenny Ling, Esq.

If you’ve thought about making an estate plan, you probably know that it should include a Will.  Maybe you’ve even heard that you need a Trust.  But what is a Trust?  Will your estate plan be incomplete without it?

A Trust is a method for transferring a person’s estate and enables a person to avoid probate.  A trust agreement set out how a person’s assets are to be managed during their life and distributed upon their death. After a person sets up a revocable living trust, they transfer assets to their trust, which they control.  Upon death, there is nothing for the courts to control because the trust owns the assets. The trust is revocable, which means that during one’s lifetime, a person can change the terms of the trust or terminate the trust. The concept is simple, but this is what keeps you and your family out of the courts.

There are some common misconceptions and fears people have about Trusts:

Creating a trust is too expensive.  The true cost of any estate plan is not just the money spent setting it up; it is also the cost to one’s family when they need it most. Not only is there the cost of probate or guardianship if a person becomes incapacitated, but also the mental and emotional hassle to manage a person’s assets after they are gone. Having a trust can alleviate these costs to a person’s family.

Trusts are just for wealthy people and I don’t own that much.  Trusts are used by many people of even modest financial means to keep their loved ones out of the court process.  A trust can help a person’s family avoid probate, make a plan in case of incapacity, avoid some estate taxes, and provide detailed instructions for the distribution of a person’s assets, which is especially crucial for beneficiaries who are minor children or just clarity to a person’s family about their wishes.  If person has a child or grandchild with special needs, a trust is an essential part of the estate plan.

I would have to give up control of my assets.  When a person creates a trust, they will name a Trustee, a person who manages the assets that have been placed in the trust.  Initially, the Trustor (the person who creates the Trust) will be the Trustee of the Trust.  Only when they die or become incapacitated does the management of the trust fall to their Successor Trustee.  The person who creates the trust will be able to do anything with their assets that they could do before they were in the trust.  The Successor Trustee has a fiduciary duty to follow the instructions in the trust or they can be held legally liable.  The Trustor decides when their loved ones will receive their inheritances, and Successor Trustee makes periodic distributions according to the terms of the trust.  A Trust can even be drafted so that assets can remain in trust for beneficiaries and are protected from their creditors, including a soon to be ex-spouse in a divorce proceeding.  Bottom line: a living trust lets a person keep full control over their assets while they are living, if they become incapacitated, and after they die.

Unlike a Will, which only comes into effect after you die, a Trust can provide benefits to you and your family during your lifetime as well as after your death.  While preparing and properly funding a Trust may take a little more time and effort, once the Trust is in place, a person will have peace of mind knowing their family is taken care of and there is no question what their wishes are.

If you aren’t sure if a trust is right for you, or if you don’t have any plan in place for your family, Contact Us to set up your complimentary 15-minute phone consultation and let us help you Make a Plan!

Jenny Ling is a partner at the Law Offices of Jenny Ling, PLLC.  She focuses her practices on estate planning, business succession planning, business and bankruptcy.