Estate planning attorney Heidi Eglash has observed that while most people appreciate the need for a will in an estate plan, trusts are less widely understood. When meeting clients to design or update their plans, Eglash says, “It’s important we discuss how various types of trusts work and consider the valuable benefits they can offer as part of a comprehensive estate plan.”
Although a trust can also be formed under a will, for purposes of this discussion trusts are legal agreements that are created to hold title to property and govern the management of that property by a trustee for the benefit of the trust’s creator (the “grantor”) and/or his or her chosen beneficiaries. These agreements can be designed to serve many different purposes, including organizing and protecting assets, saving taxes and avoiding court proceedings upon the incapacity or death of the trust creator(s).
“When you create a trust, it is intended to be a more private document that can be administered outside of court,” Eglash notes. “While a will requires a probate judge to supervise the handling of your estate after you have departed when your assets are greater than $50,000, a trust offers more opportunity for your family to work with financial professionals to advise on tax and financial management issues.”
Another unique feature of a trust is that it establishes a broader safety net for the living. A trust is often effective once it is signed and property is transferred into it. This allows the grantor to tend and use their assets, maintaining control and flexibility, but also to ensure that their rules for the oversight and use of the trust property are followed if they ever, for any reason, needed to give a named successor trustee control of the trust assets. These instructions can be written to last for a period of years, the grantors’ lifetime or even several generations.
When deciding whether to establish a trust or a will, Eglash says that in some cases, the choice is clear: “Establishing a trust really becomes compelling in blended family situations or when someone has assets in more than one state,” she says. “They may also be essential to provide for a beneficiary’s supplemental needs; for instance, if someone in the family has a disability and is a candidate for government benefits down the line, a trust is recommended.”
In all cases, though, it’s worthwhile to think about whether the qualities of a trust are necessary or desirable as part of an estate plan. Often, either plan can work, says Eglash. “Trusts just offer fuller-service and fuller integration with your financial planning over a lifetime.” Regardless of your choice, it’s imperative to consult with a qualified professional when planning your estate.
Information provided by Heidi Eglash, Estate Planning Lawyer at Johns, Flaherty & Collins, SC. For more information on wills, trusts and other estate planning matters, call Heidi at 608-784-5678.