Recognizing the Reasons You Might Need a Trust
Each year, a countless number of people pass away without having an adequate estate plan in place. This almost always results in that person’s estate going through probate upon his or her death. Probate is a much longer and involved process than would be required if a person had simply written an estate plan. While there are a number different options available when a person is creating an estate plan, one of the most commonly utilized is a trust. A trust instructs how assets should be used to care for an individual who is incapacitated and directs how assets should be distributed if a person dies. This article examines some of the additional factors that you should consider when creating a trust.
Common Reasons People Need Trusts
There are several common reasons why individuals need trusts, which include the following:
- After a person dies, a revocable trust turns into an irrevocable trust. If assets remain in a trust for the lifetime of a person’s children, the assets are shielded from any type of legal action that might arise.
- If a person attempts to pass on assets through a will, that individual’s estate will still be required to pass through probate court, which can greatly extend the length of the asset division process. Instead, trusts are capable of passing on assets outside of the probate process.
- A person is able to make sure that they are taken care of during incapacity through the creation of a trust. If you or a spouse becomes incapacitated, a trust directs a trustee to use your assets for you own care.
- For individuals who own businesses, trustee are capable of assuming the role of business owner through a trust. The trustee will then make the decision of whether to continue operating the business or to sell it. If a person attempts to pass on interest in a business through a probate court, this can be a much more difficult process.
- If a person owns property in several states and uses a will to pass on assets, an executor will often be required to probate the will in each state for title to pass properly.
A Special Note on Trusts and Children
One of the most common reasons why people use trusts is to ensure that their children receive proper care. There are a number of unique estate planning issues, however, that must be taken into consideration when a parent wants to use a trust to plan for the future care of his or her children, which include the following:
- Many parents do not want children under the age of 18 inheriting any assets. Instead, while children are under the age of 18, a guardian will control their assets. In these situations, it is critical to make sure that the person who will manage the money during this time is financially responsible.
- It is common for parents to divide all of the money in a trust into separate amounts for each child. This way, each child receives his or her own share and is able to use the money as needed.
- Some parents decide to use a special type of trust, referred to as a lifetime trust, in which finances are distributed to children when they reach a certain age. If children are given their own money, however, it becomes their money and is subject to collection attempts by creditors. Placing money in a trust during a child’s lifetime, however, offers better protection.
- In some situations, parents decide that it is appropriate to give a larger amount of money to a child with special needs or other unique circumstances instead of giving equal amounts to each child. This helps to make sure that this child is taken care of during his or her lifetime.
- If you are not certain that a child is capable of handling larger amounts of money, it is a wise idea to distribute finances to the child in installments. This means that as the child gets older, he or she receives more money from the trust. While it is up to a parent to decide the ages at which the assets will be transferred, some of the most common ages include 18, 25, 30, and 35.
Speak with an Experienced Estate Planning Lawyer
One of the best ways to learn more about trusts and the estate planning process is to obtain the assistance of an experienced estate planning lawyer. Contact Attorney Melanie Tavare today to schedule a free initial consultation. Attorney Tavare understands the numerous issues that can arise with trusts and remains committed to helping each client achieve their unique estate planning goals.