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Do I Need A Trust?

Clients frequently question trust and estate lawyers if they should have a trust. “It depends!” said the answer. Your legacy goals, the value of your assets, and even family relationships/your family tree are all issues to consider. There are numerous types of trusts, each with its own function.

If you fit the description, you may “need” or benefit from a trust as part of your estate plan, and you should talk to your attorney and financial advisor about it.

Note that a trust is always in addition to (or part of) a Will, never in place of one.

(1)If you own real property in a state other than your primary residence, transferring title to the property into the name of your Revocable Trust will avoid having to probate your Will in both states; (2) to provide for the management of trust assets by a successor trustee upon mental incapacity (think Don Sterling and the LA Clippers); (3) to provide continuity of investment management at the end-of-life without having to wait for probate; (4) privacy

Charitable Trusts – You are charitable and own highly appreciated stock and want to increase your current income (CRT: Charitable Remainder Trust); or you want to give an income stream to charity now for a period of years or your lifetime, and leave the rest to your family (CRT: Charitable Remainder Trust) (CLT: Charitable Lead Trust).

Donations to grandkids (or children) using the Yearly Exclusion gift amount of $14,000 per year ($28,000 if married and file jointly) to remain in trust beyond the age of 21; instead of (but not in addition to) annual gifts to a Uniform Transfer to Minors Act Account or 529 Plan account.

Generation Skipping or “Dynasty” Trust – This trust is used to transfer assets in trust for future generations without paying estate taxes.

Trust for (Adult) Children – You want to leave money to your children, but you want to put restrictions on when, how much, and for what purposes they can use it – for example, for health, education, support, to buy a house or start a business, or at the trustee’s discretion; control is with the trustee, who can be a family member, a bank trust company, or both; such trusts often provide creditor protection for the adult children. They’re usually made as part of a Will to be supported after your death.

Trust for a Surviving Spouse – You want to put assets in trust for your surviving spouse and have the assets pass to your children after his or her death, especially if it was a second marriage and the children are from a first marriage; the trust will qualify for the unlimited marital deduction in your estate (QTIP Trust: Qualified Terminable Interest Trust; can also be a Marital Trust).

Money to children, but with restrictions on when they can receive it.

What amounts and for what purposes they can access the funds – for example, for health such as home hospice care and more, education, support, to buy a home or start a business, or at the trustee’s discretion; control is with the trustee, who can be a family member, a bank trust company, or both; such trusts often provide creditor protection for the adult children. They’re usually made as part of a Will to be supported after your death.

Trust for a Surviving Spouse – You want to put assets in trust for your surviving spouse and have the assets pass to your children after his or her death, especially if it was a second marriage and the children are from a first marriage; the trust will qualify for the unlimited marital deduction in your estate (QTIP Trust: Qualified Terminable Interest Trust; can also be a Marital Trust).

To qualify for an unlimited estate tax marital deduction for bequests to a spouse who is not a US citizen, set up a trust for a foreign (non-US citizen) spouse (QDOT: Qualified Domestic Trust).

If you’re thinking about obtaining life insurance, instead have a trust buy it, retain it, and pay the premiums, and the proceeds won’t be liable to estate tax after you die.

Domestic Asset Protection Trust – In a few states (such as Delaware), it is feasible to safeguard assets from future creditors; but, it is not possible if you know of or have reason to know of present creditors; frequently used by doctors.

Supplemental Needs Trust — To offer additional monies to SSI recipients without jeopardizing their eligibility for payments.

Advanced Wealth Transfer Trusts (for example, a “GRAT: Grantor Retained Annuity Trust” or an Intentionally Defective Grantor Trust) – To take advantage of Internal Revenue Service Gift Tax savings for larger amounts of wealth (for example, a “GRAT: Grantor Retained Annuity Trust” or an Intentionally Defective Grantor Trust).

Gift of a House in Trust — This is a popular option for vacation properties that will be passed down through the generations (QPRT: Qualified Personal Residence Trust).

To summarize, trusts can be simple or complex, and they can help you protect your assets from family feuds, provide control over money you want to leave to your children and future generations, benefit charity while also benefiting you or your family, and carry out complex wealth transfer strategies. Your financial advisor and attorney can assist you decide if you need a trust based on your goals and wealth..

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