By Lee Miller, Esq.

Trusts and estate slawyers are often asked by clients if they should have a trust. The answer is: “It depends!” The factors include your legacy objectives, the value of your assets and, possibly, family relationships/ your family tree. There are many different types of trusts, each for a different purpose.

If the description sounds like you, then you may “need” or benefit from a trust as part of your estate plan and should discuss it with your attorney and wealth advisor.

Note: A trust is never instead of a Will, it is always in addition to (or part of ) a Will.

Revocable Trust – (1)If you own real property located in a state other than where you have 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 management of trust assets by a successor trustee upon mental incapacity (think Don Sterling and the LA Clippers); (3) provide continuity of investment management at death with no wait for probate; (4) privacy; (5) missing heirs or hard to trace family tree; or (6) potentially contentious family members who might challenge your Will.

Charitable Trusts – You are charitably inclined and you own highly appreciated stock and would like 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 balance to your family (CLT: Charitable Lead Trust).

Trust for a Minor – Gifts to grandchildren (or children) using Annual Exclusion gift amount of $14,000/year ($28,000 if married and file jointly) to stay in trust beyond age 21; instead of (not in addition to) annual gifts to a Uniform Transfer to Minors Act Account or 529 Plan account.

Generation Skipping or “Dynasty” Trust – Used to transfer assets in trust for future generations free of Estate Tax.

Trust for (Adult) Children – You want to leave money to children but with limits on when, in what amounts and for what purposes they can have access to the funds – for example, for health, education, support, to purchase a home or to start a business, or in the general discretion of the trustee; control is with the trustee, which can be a family member or a bank trust company, or both together; such trusts often may also provide creditor protection for the adult children. They are generally created by Will to be funded at your death.

Trust for a Surviving Spouse – You want to leave assets in trust at your death for the benefit of your surviving spouse and, at his/her subsequent death, to have the assets pass to your children, 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 limits on when,

in what amounts and for what purposes they can have access to the funds – for example, for health, education, support, to purchase a home or to start a business, or in the general discretion of the trustee; control is with the trustee, which can be a family member or a bank trust company, or both together; such trusts often may also provide creditor protection for the adult children. They are generally created by Will to be funded at your death.

Trust for a Surviving Spouse – You want to leave assets in trust at your death for the benefit of your surviving spouse and, at his/her subsequent death, to have the assets pass to your children, 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).

Trust for a Foreign (Non US Citizen) Spouse – To qualify for an unlimited estate tax marital deduction for bequests to a spouse who is not a US citizen (QDOT: Qualified Domestic Trust).

Life Insurance Trust – If you are thinking about buying life insurance, instead have a trust purchase and hold the life insurance and pay the premiums, and the insurance proceeds won’t be subject to estate tax on your death.

Domestic Asset Protection Trust – It is possible in a limited number of states (such as Delaware) to protect assets from future creditors; not possible if you know of or have cause to know of current creditors; often used by doctors.

Supplemental Needs Trust – To provide additional funds for individuals receiving SSI benefits, without disqualifying these benefits.

Advanced Wealth Transfer Trusts – 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 House in Trust – Often used for vacation homes that will stay in the family for generations (QPRT: Qualified Personal Residence Trust).

In conclusion, trusts can be simple or complicated, they can help you protect your assets from family squabbles, they can provide control over money that you want to leave to your children and generations after you’re gone, they can benefit charity while also benefiting you or your family, and they can accomplish complex wealth transfer strategies. Talk with your wealth advisor and attorney about what you would like to accomplish (your objectives) and how much wealth you have (your net worth statement or balance sheet) and they will help answer the question of whether you need a trust.

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