Trusts can solve a number of estate planning problems.

Many people think of the ultra wealthy when they envision the use of trusts in estate planning.

They imagine “trust fund babies” driving foreign cars, having parties on yachts, and never working a day in their lives.

According to a recent Market Watch article titled “3 Reasons a trust may make sense for your family even though your name isn’t Trump, Gates or Rockefeller,” this understanding of trusts is extremely limited.

Trusts can meet the unique estate planning needs of your family.

You do not need to be rich to benefit from the use of a trust.

Trusts solve several estate planning concerns and can even protect your children from becoming entitled and lazy adults.

Different types of trusts are used to accomplish different goals.

A revocable trust is the most flexible.

It allows the trustmaker (also known as the grantor, settlor, or trustor) who created the trust, to make changes at any time.

In short, the trustmaker retains control over the assets within the trust while alive even though the trust technically owns the assets.

After creating a trust, you will need to fund the trust.

This involves retitling bank accounts, investment accounts, and real estate to the trust.

Although you will not own the assets outright, you can manage them as the trustee.

Failing to fund your trust will result in your estate plan not functioning the way it was designed.

Those assets held in the trust will not be distributed through the probate process.

Rather, you will control the timing and conditions for asset distributions to your heirs.

The other broad trust category is the irrevocable trust.

This trust cannot be changed once it has been created.

The main purpose is to reduce estate tax liability through the removal of assets from your taxable estate.

Specific needs may also benefit from more focused trust planning.

A supplemental needs trust allows inherited assets to benefit a person with disabilities without disqualifying him or her from means-tested government benefits.

A charitable remainder trust provides income to a family member during his or her lifetime and leaves the remaining funds to a charity after the death of the individual.

Real property can be held and managed through a real estate trust.

Discuss your goals and circumstances with an experienced estate planning attorney to ensure your plan best meets your needs.

What are common estate planning goals are addressed through trusts?

Reduce estate taxes.

The current federal estate tax exemption is $11.58 million per individual.

It will increase to $11.7 million in 2021 unless a new administration in Washington chooses to lower the threshold before the current expiration date of December 31, 2025.

Some states also levy an estate tax.

Often these exemption thresholds are way below the federal limit.

For example, the limit in New York is $6 million and the limit in Massachusetts in $1 million.

If you have property in more than one state, you could subject your estate to multiple private proceedings and several state estate taxes.

Yikes!

Trusts can help you protect your assets and simplify distribution.

Avoid family battles and squandering.

Family dynamics have become more complex in recent years.

Remarriage and blended families are more common.

Some couples choose never to marry, but build a life and family together.

With trusts, you can get ahead of some of the potential pitfalls often associated with more complex family structures.

You can more adequately protect and provide for children or step-children.

If your children are minors when you die, a trust can arrange for the receipt of the inheritance to based on provisions you provide.

Some folks have children who grow up and others have children who just keep having more birthdays, if you know what I mean.

Protect the inheritance from and/or for your children accordingly.

Protect your assets while you are living.

Aging often results in forgetfulness and vulnerability.

Dementia and Alzheimer’s make seniors prime targets of financial fraud.

By keeping money and assets in the trust, you can protect your wealth from elder financial abuse.

Discuss your wishes and concerns with an experienced estate planning attorney.

You may find trusts serve your needs better than a last will and testament alone.

Reference: Market Watch (Dec. 4, 2020) “3 Reasons a trust may make sense for your family even though your name isn’t Trump, Gates or Rockefeller”