Trusts Aren’t Just for the Wealthy

Trusts are one of the essential tools of any estate plan. Trusts have been around longer than wills. Assets funded into a trust avoid probate. I’m not sure this is true?  Wills were recognized in ancient Greek Law, but Trusts were developed in the time of the Crusades.  Do you care about keeping your assets and your plan private? The probate process can be lengthy and expensive and can be avoided. A Trust provides one planning document full of instructions for the care of your loved ones upon your death.  Wills do not work until probated.  Probates are more expensive and can take weeks, months, and in some cases years if there are problems in probate. There are many different types of trusts for various purposes, and competent legal advice should be sought before establishing a trust. Estate planning is a team effort. Your investment adviser, along with your tax adviser, should assist your attorney.

Trusts aren’t just for the wealthy; a basic revocable living trust can be a useful estate-planning tool for almost anyone. No matter the value of your assets, you should learn about asset protection trusts that can help shield your heirs’ assets from creditors. Assume your entire estate consists of a brokerage account at $250,000.00, but your daughter is an OBGYN. Would you skip her because you are concerned about lawsuits? Why not set up an asset protection trust to shield her inheritance from malpractice claims?

Would you want someplace to list your instructions for your care in the event of your incapacity? Do you want to be cared for at home? What type of care do you want? A trust provides control of your assets for your family in case of your disappearance or absence instead of your family, perhaps having to wait for several years to have you declared dead to access assets and information.  Without this ability, upon a disappearance, it can take years before one can be declared legally dead, leaving the family unable to access assets and accomplish things such as repairing or selling the family home.  Meanwhile, powers of attorney can’t work without evidence that the person is alive. Remember the LINDA E fishing boat that disappeared off of Port Washington in December of 1998.

One factor to consider when establishing a trust is providing for the charities that are important to you. Let’s say you are single, no children, and want to leave everything to charity. You have several brothers and sisters, some of whom have died. Probate rules require that all potential heirs be located and given an opportunity to object. The notice needs to be sent to all family, and the distribution to charity has to wait. This could take several months. If the plan was in trust, the distributions to charity could happen privately and quickly.

. A trust can allow each spouse to control the disposition of property so that in the case of remarriage of the surviving spouse, the children are not accidentally disinherited.  Assets passing by right of survivorship or direct beneficiary designations can create the problem of children being accidentally disinherited. If you are in a second marriage, there are many unique issues to deal with. You need crystal clear instructions about who is in charge and who benefits. Tying a step-parent to step-children can be a recipe for disaster, especially when there is no impartial trustee named to ensure that your intentions are carried out in the way that you want.

Estate planning is not a do-it-yourself project. Would you do your own surgery? Estate planning is a team effort that involves your professional team.

A trust avoids the expenses and fees associated with probate on all assets owned by your trust.  Probate can be expensive and time-consuming.  It absolutely provides a forum for disgruntled heirs to bring disputes, often without them paying legal fees on the front end.  Probate benefits your creditors and requires notice to them.  But the worst thing it does is to put a judge, disgruntled heirs, creditors, alleged creditors, and everyone but your family in charge of your affairs.

A trust allows life insurance to be paid to the trust, so it passes according to your distribution and control plan.  Life insurance left directly to beneficiaries can be subject to divorces, lawsuits, and creditors, or it may undo your overall planning due to lack of coordination with your distribution plan.

A trust can provide for a beneficiary with special needs so they can remain eligible for a public benefit program.  Wills can allow protective trusts but require probate, which automatically involves the court and makes it easier for governmental agencies to bring claims against your loved ones.

If you own real estate outside of Wisconsin, a trust can eliminate multiple probates upon your death.