Benefits of Using a Trust as Part of Your Estate Planning
Posted In: Estate Planning | Posted by: Arenstein & Anderson Co., LPA
The idea that you must have complicated estate planning needs before you could benefit from a trust as a part of your estate planning is false. There are some common situations where a family could benefit from having trusts in their estate plans. Meeting with experienced and affordable estate planning attorneys is a must to determine if a trust would benefit you and your family.
Historically, trusts got a lot of attention as an integral part of federal and Ohio estate tax planning. However, there are some other ways that trusts can help improve estate planning that have nothing to do with federal estate tax.
The three most common reasons to use trusts are:
- So minor children do not get their inheritance when they turn 18;
- To provide privacy and avoid probate; and
- To control who gets what and when, including creditor protection.
Guardianships
In a tragic case where a child loses both parents before age 18, a mechanism is needed to hold and administer the minor’s assets until age 18. Without a trust, the only option provided by law for management of a minor’s inheritance is a guardianship.
Guardianships have several deficiencies. First, spending any funds from a guardianship account needs probate court approval. This creates a situation where the guardian may not be able to spend money on things that the parent would have wanted for the child.
Another problem is the annual guardian reports and accounts that must be filed. Getting court permission to spend money, filing accounts and reports, and handling other issues that typically happen always takes time and costs money. It also typically needs the assistance of an attorney, whose fees will be paid out of the guardianship account, which means less cash for the child.
Third, with guardianship funds, there are far fewer investment alternatives available. With a limited number of ways to invest the funds, it makes it more difficult for the assets to grow.
Finally, the guardianship will be terminated when the child turns 18, and all the funds will be paid out to the young adult. This termination and payout is required no matter how much money is in the account.
Offer Privacy & Avoid Probate
The next area where trusts can enhance estate planning is the ability to offer privacy and avoid probate. As a private document and arrangement, the public does not have access to review trusts and trust assets. This is not the case with probate court files. All wills are public records, and most probate court filings, including inventories and accounts, are as well. A trust can be a very useful tool to create privacy.
Similarly, assets in trust are not subject to probate administration. The idea of avoiding probate is one of the most common questions heard, and most folks like the idea of avoiding probate. The benefits of avoiding probate are that it can save time and money by eliminating court costs, administration expenses, and the biggie… legal fees. Simplicity of transitioning assets and lower costs are always attractive features in the estate planning area.
Control Timing/Distribution of Assets
The third common reason to have a trust is to control the timing and distribution of assetsin the future. All clients recognize the changes to decision making that occur over time, such as the priorities of an 18 year old compared with a 35 year old. This is where a trust can help. By delaying access to principal, parents can protect children (or grandchildren) not only from themselves, but they can also use a trust to protect them from creditors and predators.
As discussed above, a trust may add benefit and value to your estate planning. Estate planning with wills, trusts, financial powers of attorney, health care powers of attorney, and living wills (if desired) does not cost thousands upon thousands of dollars. In fact, the addition of simple trusts to your estate plan may only cost you a few hundred dollars more: a bargain for the peace of mind it will bring you now, in anticipation for the worst. Let the experienced attorneys at Arenstein & Andersen Co., LPA help you gain peace of mind by explaining the estate planning process and by providing you with options to help you and your family.
About Arenstein & Andersen Co., LPA
Arenstein & Andersen Co., LPA is a Dublin, Ohio law firm that provides comprehensive estate planning and probate services. Some of our legal services relating to estate planning and probate include: preparing revocable trusts, wills, powers of attorney, healthcare powers of attorney, and living wills; assisting with advanced wealth transfer strategies, including the preparation of irrevocable trusts, such as domestic asset protection trusts, charitable remainder trusts, charitable lead trusts, and life insurance trusts, along with other wealth transfer tools such as family limited partnerships; counseling clients on probate avoidance techniques to streamline and reduce the costs associated with estate administration; assisting business owners with succession and wealth transfer planning; planning for children or other loved ones with special needs to include the use of wholly discretionary trusts, supplemental services trusts, and special needs trusts to protect the beneficiary’s eligibility for public assistance benefits; advising clients on Medicaid planning and other elder care issues; representing Executors, Administrators, and Trustees with the administration of estates and trusts, including assistance with tax planning and the preparation of Federal estate tax returns, and Federal and Ohio fiduciary income tax returns; and assisting with applications for, and the administration of, guardianships for both minors and incompetents.
Posted In: Estate Planning