Estate Planning

Why You Don’t Need A Trust for Your Estate Plan

Before addressing (in the coming weeks) reasons people may want a trust, we want to address some reasons that most people do not need a trust.

People are sometimes told to have a trust to avoid the cost of probate. In most cases, we disagree. Probate is a process, supervised by a judge, which ensures a deceased person’s assets go where they should. It is true that assets in a trust do not need to go through probate.

It is not at all necessarily true that the cost of creating a trust is cheaper than going through probate. Also, if the trust is not properly funded (which we will explain in a future column), probate may still be necessary! In our opinion, the ability to avoid the cost of probate may be an advantage of having a trust, but this alone should rarely be the reason to create a trust.

We have also been asked to create a trust in order to protect assets from creditors. Although we will discuss this in more detail in the future, there are two important points to remember. First, if you have a current debt or a dispute that may result in a judgment, placing your assets in a trust will not protect you from that judgment.

Second, if you place your assets into a trust, but still retain the ability to get at those assets yourself, your creditors likely can get at those assets as well. There is a place for asset protection trusts but they are effective only in limited circumstances.

Trusts are also used to help minimize or avoid estate taxes. This is a very legitimate reason to use specific, sophisticated types of trusts. However, the vast majority of people do not need to worry about avoiding estate taxes and therefore do not need this type of trust. If you pass away in 2015, your estate won’t owe estate taxes unless your net worth exceeds 5.43 million dollars. Not too many of us will need that trust.

There are, however, several very appropriate reasons to consider a trust. In the next column, we will begin addressing those reasons.

Further Reading

What You Don’t Know That You Don’t Know

Think You Don’t Need An Estate Plan?

Why You Are The Biggest Threat To Your Estate Plan

 Why You Need a Will

Why You Don’t Need A Trust for Your Estate Plan

Why You Need a Trust for Your Estate Plan

Are You Prepared for the Threats to Your Estate?

How Your Family Can Inadvertently be a Threat to Your Estate- Part 1

How Your Family Can Inadvertently be a Threat to Your Estate- Part 2

How Your Family Can Inadvertently be a Threat to Your Estate- Part 3

When Business Interests and Estates Combine- Part 1

When Business Interests and Estates Combine- Part 2

When Business Interests and Estates Combine- Part 3

So Who Gets the Home?

Have you Had the “Talk” with Your Children?