The Top Five Reasons You Need A Trust
Updated: Apr 2, 2020
As an Estate Planning attorney, I often hear “I don’t really need all that. My estate is simple. It’s too expensive.” I also hear “It will all just go to my spouse or kids after I pass”. Typically, my response is “It’s not so simple and it will actually save you money”. Not to mention, you should prepare for the unexpected.
A Trust is a written document that allows for you to transfer your property to your family, heirs and loved ones. During your lifetime, you stay in control of your assets and you can easily amend your Trust when necessary. You leave instructions in your Trust in the event of your death. You can also name a Trustee to take care of your finances privately if you become incapacitated.
Here are the top five reasons you need a Trust:
1. You control who receives your property after your death.
Believe it or not, everything may not go to your spouse or kids after you die. The state of California has something called “intestate succession”. That means if you do not leave a Trust or a Will with instruction as to who should receive what property, California has already decided for you. Even when you hold title to real property with your spouse as joint tenants or as community property with the right of survivorship, when one of you die if the house has not been put into a Trust, it may need to go through the probate process. There, it will be distributed to heirs, which could be someone other than who you intended to receive the property.
2. Your estate will avoid probate.
If you have a Trust, the government will not have to get involved and you can protect your privacy. If you do not have a Trust, your estate will most likely have to go through probate. Probate is an expensive process in which the Court decides who receives your property and how it will be distributed. Along with the potential of unintended beneficiaries, it is expensive. Your estate will likely pay thousands of dollars in probate fees, costs and attorney fees. A Trust can be established in a short time, sometimes weeks. Probate takes anywhere from one year to eighteen months and even more.
3. You can protect your children.
As I explained above, your Trust contains instructions in the event of your death or incapacity. If you have minor children, you need to designate guardians. If you are divorced, do you want your ex-spouse spending the money your children will inherit as they please? If the answer is no, you can use a Trust to specifically instruct how the money is to be spent and set out guidelines for future distributions. If your children are minors or young adults you can specify at what age you would like for them to control their assets. You can even protect them from a future marriage that ends in divorce, a creditor, or a lawsuit.
4. Beneficiary designations are not always enough.
When was the last time you updated your beneficiary designations? Beneficiary designations are allowed on life insurance accounts, retirement accounts, bank accounts and other types of investments. However, life happens fast and oftentimes you forget to update your beneficiaries. If you have been divorced, had a child or the person named as the beneficiary has died, you need to update your designations. There are advantages and disadvantages to naming your Trust as a beneficiary. One of the main advantages is that you do not have to worry about the above. Additionally, many institutions will not make distributions to minor children. Therefore, if your minor child is listed as a beneficiary the Court will have to become involved. If you have a properly structured Trust you can avoid Court intervention. You can also protect your spouse from creditors.
5. Your family will thank you.
As an estate planner and as a litigator, I have seen the worst sides of people when there is money to be inherited. People do things you would never have imagined them to do. I have represented many people in Court fighting over assets because the deceased did not have an estate plan or it was poorly drafted. Having a properly drafted estate plan can drastically decrease any potential family strife. If you pass away without a plan, your surviving family will often end up in an attorney’s office asking for help. Not only are they trying to grieve, they also must figure out what to do with your estate because no instructions were left.
There are many types of Trusts and many more reasons you need to establish one now. The type of Trust you need depends on your specific life circumstances. The best way to determine what type of Trust you need is to see an attorney. Remember, if you have a Trust, you can control who receives your property after your death, your estate will avoid the time and expense of probate, you can protect your children, you can avoid beneficiary designation disasters and your family will thank you.