Reasons to Use a Trust
There are many reasons to use a trust:
- Probate avoidance. At death, assets titled in the name of an individual must go through a process to retitle the assets to the appropriate people who’ve inherited them. This is called probate. In Minnesota, probate takes about 12 to 18 months, and costs about 5% of the estate. Most of that cost goes to trial lawyers who bill the family by the hour.
- Privacy. A trust is a private document. A will, on the other hand, must be filed in the probate court before it is determined to be valid. Probate is a public process. Thus, everyone who wishes may know the contents of the will and the assets which were part of the probate estate. So, for example, they would know about the child born out of wedlock who received an inheritance or the child who was disinherited because of a family dispute. The nosy neighbor would know the dirty laundry and could spread the gossip. Also, predators would know how much money beneficiaries are inheriting. For example, they might know that a weak-willed beneficiary is inheriting $200,000 and could be approached for money. So, if a client is at all concerned about privacy, a trust will serve their needs better than a will.
- Incapacity planning. A will does nothing to help with incapacity planning. A will only comes into play at death. So, if the testator is not dead, the will does not control anything, even if the testator is incapacitated. Conversely, a trust can provide for the management of the assets upon the grantor’s incapacity. This is one of the great benefits of a trust compared to a will. The trust can have whatever standard is desired to determine incapacity. For example, it could require the certification of one or two physicians.
- Management. A trust can provide a vehicle for the management of assets during life and after death. Often, even if a grantor of a trust has capacity, they may reach a time in their life when they no longer wish to manage their assets. A trust provides a simple mechanism for this to happen. The grantor, who typically serves as the initial trustee, simply resigns and the person who was named as the successor trustee is notified and takes on the management responsibilities.
In addition to the benefits which revocable trusts have which wills do not, the trust has other capabilities which wills can also achieve. For example, trusts and wills both can save estate taxes, spawn trusts for beneficiaries at the death of the grantor/testator, etc.
In upcoming posts, I’ll discuss whom you should choose as trustee. In another posts, I’ll discuss various ways in which you could leave assets to beneficiaries, and the pros and cons of each method.
How can I decide if a Trust is right for me?
Call today to schedule your complimentary estate planning consultation with Ed Matthews.
Ed Matthews is one of only a few attorneys in the state of Minnesota who is also a currently licensed Certified Public Accountant (CPA). Ed graduated summa cum laude from William Mitchell College of Law in 2003, where he served as Executive Editor of the Law Review. He is a former Minnesota Supreme Court law clerk. Perhaps, most importantly, he does not practice probate! Instead, he has dedicated his life to helping Minnesota families avoid probate and protect their hard-earned assets.
To schedule a complimentary consultation with Ed Matthews, call (651) 501-5608.
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