Do I Need a Trust?
At Wakefield Law, we hear this question all the time! Over the past few decades, there has been a deluge of information about estate planning document choices, ever-changing estate laws, tax issues, and horror stories coming out of Will contests and poorly administered Trusts. Clients call our firm for our expertise, and some of the most frequent questions we get revolve around what kinds of plans are necessary depending on personal and unique circumstances.
Unfortunately, there is no cookie-cutter, quick answer to this question! Clients should be wary of lawyers that seem to have a pre-conceived idea of what everyone may need, or lawyers who are always trying to push the most expensive option. Every individual has a unique familial and financial landscape – that means a lot of information and thought goes into what types of plans are being recommended to folks that come through our office. All that being said, here are the main points I mention when someone asks me, “Do I need a Trust?”
Most individuals who utilize my firm’s estate planning services are trying to achieve two goals:
1) Make sure the right people are stepping up at the right time - making decisions that are in accordance with their own general life values, either for themselves, for their loved ones, or with their finances.
2) AVOID CONFLICT.
These two goals seem simple, and in essence they are. A well-executed and basic estate plan can often achieve the first goal. The Will designates an Executor to oversee transfer of assets and appointment of Guardianship for minor children, the Durable Power of Attorney designates an Attorney-in-Fact who will step up at the time detailed in the document to look out for the client’s financial interests, and the Advance Medical Directive, or Medical Power of Attorney, appoints the agent who will look out for the client’s medical well-being if they become incapacitated.
However, depending on someone’s unique life landscape, a Trust may be the more appropriate option in the pursuit of the two goals above.
For the purposes of this blog, the client in this hypothetical will be receiving a Revocable Living Trust. In furtherance of the first goal, a Trust works well in several ways. A Trust gives the client substantial flexibility. In contrast with a basic Will, a Trust nominates a Trustee, who is the controller of the Trust. The Trustee, or co-Trustees, depending on the situation, must follow the rules detailed by the client in the Trust. If the client becomes incapacitated, the Trustee can step in quickly to make sure the client is taken care of, and the rules of the Trust continue to be followed. Again, juxtaposed to the Will, the Trust can provide for a client’s family and heirs with much more control. An example is that with a Will, minors can stand to inherit lump sums regardless of whether they are in a good position to do so. Often, young people inherit large amounts and can be at risk of misusing the funds. However, with the Trust, the Trustee could be instructed to make sure a beneficiary receives economic benefits from the Trust such that their healthcare, living situation, and education are paid for, but otherwise receive no assets from the Trust. Then, when the minor reaches a certain age or meets some other prerequisite, they will inherit assets from the Trust.
Regarding the second goal, avoidance of conflict, the Trust is a particularly elegant tool. Using the same hypothetical client as above, with a basic Will, when the client passes away, their assets will go through the probate process. When someone passes away, a probate matter is opened in the Circuit Court where they lived when they passed away. This probate process lasts at least six months but can last much longer depending on the complexity of the estate, whether there are minors that stand to inherit, and especially if there is any conflict. Additionally, the probate process is public in nature. Details are all in the court’s records and can be viewed by any who know how to do so. Naturally, this process can lead to contest, or conflict. Then, if lawyers get involved, the process will become stressful and expensive for the client.
Now, say this same client instead had created a probate avoidance focused Revocable Living Trust with Wakefield Law, and the funding of the Trust occurred correctly, this client would see a vastly different outcome. If an individual transfers their assets into a Trust, and there are no assets in their name individually when they pass away, no probate needs to occur. Instead, the Trustee follows the rules written by the client in the Trust, and the wishes of the client become reality around the kitchen table, rather than in a probate courtroom. Very importantly, this process is also private. A Trust does not get filed with the court and the details of who got what, or when, are all private to those who have copies of the Trust. Naturally, this removes substantial risk for conflict.
QUESTIONS?
If you would like to speak with a Wakefield Law attorney about your estate plan, and whether a Trust is right for you, give us a call! Consultations are always free, and we can help demystify the process for you and your family. Our office number is (703) 771-9740. You can also email us at law@wakefieldpllc.com.