Why You May Want a Trust to Achieve Your Estate Planning Goals

Trusts are the misunderstood poor cousins of wills. They do not have to be overly complicated and, depending on the circumstances, may be better than a will for achieving certain estate planning goals.

More people than you would think should consider using a revocable trust to dispose of assets, as discussed in MoneyWatch, “5 reasons you need a trust, not a will“. The top five reasons are:

1. Pass on assets privately, quickly and efficiently. A revocable trust as a vehicle to distribute your estate allows your beneficiaries some privacy. The trust isn’t filed with the probate court and isn’t a public document (unlike a will). Property transferred into a revocable trust during your lifetime isn’t subject to the expense and delays of probate.
2. Preserve assets for heirs and charities. Changes can be made to your revocable trust anytime. However, when you pass away, the trust becomes irrevocable. The provisions that pertain to the disposition of assets to your heirs and charities will be administered by your trustee under the trust’s terms.
3. Assets that remain in your trust after your death typically aren’t considered marital property. Those assets aren’t subject to division in a settlement if the beneficiary gets divorced. However, in many states, a divorce court may take the beneficiary’s income interest into consideration when determining the division of marital property or support obligations.
4. Retain control over distributions. A trust can contain language that says when distributions of income and principal will be available to beneficiaries, and it can have distributions for specific purposes like education or health care expenses. A trust can also include language for distributions based on attaining specific ages. For example, one-third of the principal is distributed at age 30, half at 35 and the rest at 40.
5. Distribute retirement accounts efficiently. If the trust is the beneficiary of your retirement accounts and if it is written correctly, the trustee can limit withdrawals to the retirement account’s minimum required distributions based on the life expectancy of the oldest beneficiary. This avoids the mistake of a beneficiary liquidating a retirement account and triggering a large income tax obligation.

Speak with an estate planning attorney to seek if this strategy will work for your specific circumstances.

Reference: MoneyWatch (September 17, 2015) “5 reasons you need a trust, not a will”

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