Why You May Need a Trust, Regardless of Your Age or Net Worth
You have worked hard to accumulate your wealth and, through thoughtful planning, you can also determine how it is distributed once you are gone.
Basic estate planning should begin with a will. Yet wills do not cover every possibility and may not be the best option for every estate, which is why many individuals, families and business owners may benefit from establishing a trust. Although estate planning is sometimes regarded as only for the ultra rich1, alternatively, trusts can be useful planning vehicles regardless of your age or net worth.
A trust might be described as a fiduciary arrangement that outlines how your assets will be distributed after your passing, usually without the involvement of a probate court. Trusts are especially beneficial because they can be used to accomplish important objectives, from financial benefits to personal goals.
Reasons You May Want a Trust
1. Ensure greater control of assets
A trust allows you to decide how your estate is managed in different situations, offering more control than a will or other legal documents. You create the trust, so you can be specific about the amount, timing, and purpose of any distributions and can direct them to any beneficiaries you choose. You can select from a variety of special-use trusts to fit your specific circumstances and the goals that are important to you, such as charitable giving, providing for a family member with special needs, or tax reduction. An experienced trust officer can help you understand what type of trust might be right for you as a vehicle for protecting your hard-earned assets.
2. Ensure privacy
A will and assets not covered by a will are subject to probate, which means they become public records. The probate process itself is a matter of public record, allowing anyone to look up the assets in the estate and see the beneficiaries. In some states, these records are easily searchable online. Putting assets into a trust removes the assets from the probate process, therefore providing a greater level of privacy. Property such as a family home also can be placed in a trust. For families with substantial assets, the extra level of privacy can be important.
3. Save money and protect property
When creating an estate plan, a key concern can be ensuring you are protecting assets from lawsuits or creditors. Additionally, at death, the cost of probate can reduce the value of an estate. Certain trusts can be used to set aside assets and real property so that they are protected from lawsuits or creditors, and may provide asset protection during divorce proceedings. This extra layer of protection can be important if you own property in more than one state, plan to leave assets to members of an extended family or have other, more complicated circumstances. For example, establishing a special needs trust can ensure that your beneficiary will receive the benefits from the trust while also still qualifying to receive government assistance. The use of trusts may also help you reduce estate tax exposure.
4. Plan for what-ifs
A trust can be an important aspect of planning for the unexpected. If you face an illness or serious injury, and your investments are not properly managed or you have unpaid bills, financial damage could occur. Creating a trust allows you to name a trustee who can immediately take over management of your wealth in the event of incapacity. Similarly, a trust may be used as a method to help mitigate sometimes unpredictable family disputes. Parents with children who may not handle money well or struggle with mental health or addiction issues may decide to put funds for those children in a trust rather than an outright inheritance. Keeping the funds in a trust allows an impartial trustee, such as a corporate trustee, to make the decisions rather than individual family members, which can be helpful if family members disagree or the issue is sensitive.
While not everyone needs a trust, it is important to remember that trusts can offer unique assurances: that your assets will be distributed according to your wishes and that the asset transfer process will be completed as smoothly as possible for your heirs. For information, contact your D.A. Davidson financial advisor or a trust officer with D.A. Davidson Trust Company: (800) 634-5526.
D.A. Davidson & Co. is a registered broker-dealer and registered investment adviser that does not provide tax or legal advice. Information contained herein has been obtained by sources we consider reliable, but is not guaranteed and we are not soliciting any action based upon it. Any opinions expressed are based on our interpretation of the data available to us at the time of the original article. These opinions are subject to change at any time without notice. Copyright D.A. Davidson & Co., 2019. All rights reserved. Member SIPC.