Should I Have a Trust in my Estate Plan?

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October 25, 2022 •  The Estate & Elder Law Center of Southside Virginia, PLLC
A simple will works for some people, but maybe not for you. Are you in a second marriage? Have minor children or maybe an adult-disabled child? Concerned about fraud? These are just a few of the many reasons to consider a trust.
Robert W. Haley, managing lawyer
Robert W. Haley
Certified Elder Law Attorney® Robert W. Haley brings over 27 years of legal expertise and knowledge to his firm, which concentrates solely on the areas of elder law, estate planning (Last Will & Testaments, Durable Powers of Attorney, Health Care Powers of Attorney, Living Wills, Trusts, etc.,.) Asset Protection/Medicaid Planning and fiduciary services. For many years, Robert practiced in real estate law, and in general practice, but decided to narrow his focus to elder law and estate planning when he realized the tremendous need for proper planning to be filled in Southside Virginia.

"Should I Have a Trust in my Estate Plan?" A lot of people thinking about getting an estate plan together, may find themselves asking this very exact question! Kiplinger’s recent article entitled “Why Do I Need a Trust?” says that if having assets distributed outright to a beneficiary could cause potential issues, there are several reasons to think about creating a revocable living trust. In my own practice, I have recently seen many instances of troubled probate administration that could have been avoided using trusts!  There are several reasons to think about creating a trust in your estate plan such as:

If you prefer to place specific conditions on the funds, you must have a trust. Many trusts state that distributions can only take place at future ages, like a third of the inheritance at age 30, half at 35 and the remainder at 40. I particularly favor these types of trusts because history shows that the first installment is likely to be gone, in a hurry! Thereafter, the beneficiary might be more careful with their inheritance. 

 Trusts can be especially important with second marriages, if one spouse wants to leave their assets to their children rather than their stepchildren. At times, a trust is the only answer of blended families. 

Just last week I became aware of a situation where an unmarried couple had a child together. They lived together but no estate planning had been done; the father died unexpectedly! Since he had no “spouse” his minor child was his sole heir. But a minor cannot inherit property outright! Thus, since there was no will creating a Minor’s Trust. Without that, a petition must be filed in Circuit Court asking for the appointment of a Guardian of the Estate of a Minor. This brings added costs and more headaches during an already stressful time.   

If your job has a substantial risk of liability, having assets passed down in trust (once the trust becomes irrevocable) may protect assets from being attached in a lawsuit. This can be extremely specific with respect to state law and the type of lawsuit, so talk to an experienced estate planning attorney before making any decisions. 

 For large estates that are expected to grow, creating trusts during your lifetime and gifting assets can remove the growth from your estate and lower future estate taxes. Remember that revocable (or living) trusts become irrevocable on your passing, so anything in the revocable trust will be out of the beneficiary’s estate.  

If you have several beneficiaries in different proportions and want to specify who gets what, you may need to use a trust. If you want to leave one beneficiary a specific amount, it can also get complicated. Custodians will sometimes review and accept complex beneficiary requests. However, they usually have to be reviewed and modified by their legal department. 

Trusts are important, virtually essential when minor children are involved. That is because you’re going to need a legal guardian for the child, and one who will oversee the funds. Since minors can’t own assets outright, you must make sure the funds are protected. The trust should specify your intentions for the funds and the conditions, so the child (or the guardian) cannot be frivolous with the funds.   Likewise, for Special Needs Planning for adult-disabled children, a trust properly set up for that person's care by an experienced and certified elder law attorney can help ensure that state benefits for that person are protected long-term during their lifetime!

If your intention is to provide for grandchildren on your passing, or you do not trust the parents to keep the inheritance funds for their children, a trust for the grandchildren (or future grandchildren) is a preferred option, because if you leave assets outright to their parents there is no guarantee the funds will trickle down. 

Over the years, I have seen so many bad situations that could have been avoided with proper trust planning!!! So, what is the answer to the question of "Should I Have a Trust in my Estate Plan?" Simply put, It's crucial to talk to an experienced estate planning attorney about your individual circumstances and your intentions, so that they can properly direct you on how to how to protect your assets and your wishes. Book a call with us to see how we can help! We have offices in Bassett, Danville and Lynchburg to serve you.

Reference: Kiplinger (August 12, 2022) “Why Do I Need a Trust?”

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