Many people feel they need a trust for their assets in today’s world, when, in reality, a simple will may be sufficient and much more cost-effective. This guide provides the most common reasons a person should consider a trust and pour-over will instead of a simple will.
1 You Have Substantial Assets
There is currently a $5mil minimum limit on federal estate taxes. This number may decrease to $1mil in January, 2013, unless Congress acts to extend this ceiling. In estate planning terms, if you intend to leave more than $5mil in assets upon your passing, there may be significant tax benefits to setting up a trust. A trust can double the exemption amount available to married couples resulting in significant tax savings. Note that the exemption amount does include gifts made during the grantor’s lifetime. In Arizona there is NO estate tax or inheritance tax. If you are in a different jurisdiction, you should contact a local attorney to see if there would be tax benefits to setting up a trust.
2 You Have a “Blended” Family
A trust is a good option for families with children from a prior relationship. A trust allows each spouse to leave assets to their respective children without the fear of their children later being cut out of a will. The trust allows the assets of one spouse to pass to his or her children regardless of the surviving spouse changing his or her will or remarrying. A trust can set up three schedules, one with the first spouse’s assets, the other with the second spouse’s assets, and a third with both spouse’s joint assets.
3 Property Ownership in Multiple States
A third circumstance where a trust is helpful is when a person owns properties or other assets located in multiple states and he or she wishes to avoid multiple probate on each state where the assets are located. Probate differs by state law, and is typically a drawn out process with many steps involved. The trust can offer a way to, in some cases, avoid probate all together. Even when a person has a trust, however, there may be unexpected assets that were never titled in the name of the trust that still have to pass through probate.
4 Immediate Transfer of Assets
A trust provides a way for assets to avoid probate. Probate can be a long, drawn out process, and in many cases the assets can be held up for months or even years before the beneficiary receives them. Trusts allow assets to pass automatically upon the death of a party without having to pass through probate. Beware, however, because probate allows a period of time for creditors to make valid claims against the estate. When assets pass by trust, the creditors may still have a claim against the assets, but because the assets passed automatically, the beneficiary may have already spent the assets. In such a case, the beneficiary may become liable for the money inherited through the trust.
5 A Simple Will
In many cases a will is sufficient instead of a trust. If you do decide to get a trust, however, you should also have a pour-over will. This type of will simply states that any assets that existed outside of the trust at the time of the decedent’s death will pass directly into the trust. This type of will helps streamline the estate process once the decedent has passed.
Additional Resources
Many firms will offer a free consultation for estate planning. If you are trying to figure out what estate plan will best fit your needs, an attorney can offer invaluable advice.
The Carroll Law Firm's Blog 
Leave a comment