Trusts for Estate Planning

A trust is a very useful tool in estate planning, particularly for estates that involve real property, like a family house, or estates which intend to give multiple people a share in the same asset. A trust is a legal creation; it’s essentially a fictitious entity which can hold property in its own name, and which is created with instructions as to how to distribute whatever property it holds. A trust is something you need in addition to a will, not in place of a will, and the two should work together as much as possible. Here are a couple of examples of how you can use a trust in estate planning; remember that neither of these constitute legal advice, and you will want to consult directly with a firm like us as to how to set up a trust in your particular instance.

Example 1: Arnold owns a home with a mortgage and wants the home to pass in equal shares to his two children, Ben and Cathy, after he passes. Since probate is a long and expensive process, Arnold wants to avoid making his children go through it, and wants the house to pass directly. Here, we can make a trust for Arnold that holds title to his house, with instructions in the trust to distribute the house in equal shares to Ben and Cathy when Arnold passes. Since the trust owns the house, not Arnold, the house is not part of his estate and does not need to go through probate. Arnold can also choose exactly how to structure shares; we strongly recommend including a provision in the trust for when and how one child can buy out the shares of another. This makes the transfer of the house much easier and cheaper than if it had gone through probate, and lets Ben and Cathy do any planning they need to in advance.

Example 2: Don wants to pass the proceeds of his retirement account and IRA to his three grandchildren, Emily, Fred, and George. Emily is currently 3 years old, Fred is 5, and George is 19. Don doesn’t want to pass significant amounts of money to a child, of course, but does want to assure that the money goes to his grandchildren when they’re adults. Here, we make a trust for Don that survives his passing. The trust holds the money from the accounts, and a trustee is selected to administer the money. Usually, Don will specify that descendants who are already adults, like George, can have their share directly, but that the trust will hold the money for Emily and Fred until they’re 18. Don can also allow the trustee to make payments for the benefit of Emily and Fred before that time, for example allowing the trust to pay tuition or medical payments.

Trusts, generally, give you a much greater control over what happens with your assets than just a will on its own, and they can be excellent vehicles for controlling costs like taxes during your life. Trusts are also a great way to minimize fights among inheritors, both by making the inheritance more certain, and by helping you make sure the right things go to the right people. Verbeck Law does trusts in estate planning on an hourly basis, and if you’d like to get a quote for estate planning with a trust, please fill out the form below, which includes some questions about the nature of your estate. We look forward to working with you!