Do I Need a Trust?

One of the most common questions in estate planning is, “Do I need a trust?” The answer depends on your unique situation and goals. Everyone should have a will; however, having a trust in addition to a will depends on your individual circumstances. Trusts are more powerful than wills in terms of what they can accomplish, but they are not right for everyone. A clear understanding of your estate planning goals is a critical first step in the process of determining whether a trust is in your best interest. An experienced attorney can help you navigate the complexities involved with estate planning so you can make informed decisions about choosing the right planning tools for your unique situation.

What is a Trust?

A trust is a legal relationship created by an agreement for an individual to hold property for the benefit of another. The trust is created by a grantor (or trust creator) for the benefit of one or more beneficiaries. When creating a trust, a trustee is appointed to manage and oversee the trust assets according to the terms of the trust agreement.

There are two main categories of trusts: revocable and irrevocable trusts. A revocable trust, also referred to as a living trust, is a trust that a grantor can modify during their lifetime. An irrevocable trust is one where the grantor relinquishes the right to make any revisions to the trust and its assets after its creation. Generally, living trusts are controlled by the grantor who acts as their own trustee during their lifetime. Upon death, living trusts convert to irrevocable trusts.

How Property Passes Upon Death

When an individual passes away, assets will pass to heirs depending on the specific type of property and how the estate plan is structured. Property can pass through the court probate process or outside of the court. Assets that are part of an individual’s estate generally include those governed by a will or, in the absence of a will, by intestate succession laws. Other assets, such as those designated by a beneficiary, transferred to a trust, payable on death, or jointly owned with survivorship rights, avoid the probate process and pass outside the court.

Having a revocable or irrevocable trust can provide numerous benefits to families who utilize them correctly. Some of these benefits include:

• Keeping assets out of the court probate process and maintaining your estate and financial privacy.
• Giving you more control over where your assets go and how they are distributed after your death.
• Avoiding a guardianship proceeding if you become incapacitated and unable to manage your own affairs.
• Maintaining wealth for beneficiaries who are not capable of managing their affairs or who would not manage their wealth with your objectives in mind.
• Shielding beneficiaries from receiving lump sum payments that may come with significant tax consequences.
• Avoiding other costly tax consequences, such as failing to name a beneficiary of a retirement or other IRA account. If no beneficiary is named, the assets will default to your estate. Since an estate is not a qualified beneficiary, these assets will have to be liquidated, potentially causing significant tax liabilities.
• Planning for mixed families. Traditional estate planning with a simple will doesn’t work well for most families in second marriages. Many who have children from previous relationships want to safeguard a portion of their estate for those members of their family.
• Planning for Medicaid and long-term care. If you or your spouse will need to qualify for any type of care facility as you age, it is critical to establish an estate plan as early as possible. Otherwise, you may end up spending down your estate to qualify for assistance.
• Planning for special needs beneficiaries. Leaving special needs beneficiaries funds without clear parameters can negatively affect their ability to continue qualifying for aid.
• For those with significant wealth, trusts can be an effective way to transfer assets, grow highly appreciable assets, and minimize or eliminate estate tax liability.

Due to the complex nature of trusts and estate planning, it is crucial to have an experienced attorney who specializes in creating tailored solutions to safeguard your assets and provide for your loved ones. At Crosswhite Law, our estate planning attorneys have worked closely with individuals in and around Iredell, Catawba, Alexander, Rowan, Davie and surrounding counties in all aspects of estate planning.

If you are considering a trust as part of your estate plan, or need guidance in establishing or revising an estate plan, you can trust our attorneys to help you create an individualized plan for your needs. Our attorneys are skilled problem solvers who understand the complexities of trusts and how they fit into estate plans. From simple to complex estates and administration, our attorneys can help you make informed decisions about the right plan for your needs. To schedule a confidential consultation with one of our Statesville estate planning attorneys, call us at (704) 445-3085 or complete our online consultation request form.