The most basic answer to this question is yes. Although the estate tax exclusion amount has increased to $11.2 million for each tax payer, Trusts are still an important part of your estate plan. Reducing your potential estate tax exposure is just one of the many benefits of a trust. The most common type of trust is a “living trust.” A living trust is a trust that remains amendable and revocable during the lifetime of the Settlor (creator of the trust). Below are just a few examples of why you may still need a trust.

Avoids the Need for a Conservatorship

If there comes a time when you are no longer able to manage your financial affairs, due to Alzheimer’s, dementia or some other disability, a trust will insure that you will not have to go through the expense of having someone take care of your finances on your behalf. A Conservatorship is a legal process where a conservator is appointed by the Court to manage a person’s financial affairs because they are no longer able to do so. Conservatorship can be very costly. Not only is the Conservator normally represented by counsel, but you will also be represented by counsel, sometimes court-appointed counsel, and your estate ends up paying the legal fees of both attorneys. The Conservatorship will most likely require on-going fees and costs. The Conservator may be required to prepare an annual budget and accounting. Although these annual reports are necessary and important, they are also costly. The cost for just having the court accountant review the accounting is $300.00. This does not include the cost of preparing the budget or accounting. Therefore, it is easy to see why a Trust would be beneficial, especially if the person you want to be named your conservator is the person you would name as your successor Trust.

Avoids Probate and Protects Privacy

One of the great benefits of a Trust, if funded correctly, is that there will be no need to open a probate. In some cases, the cost of opening and administering a probate estate is far greater than the cost of establishing and administering a trust. In addition, you will be able to protect the privacy of your beneficiaries. If you only had a Will, your Will would be filed with the Court, unless it qualified as a small estate. Once the Will is filed, it becomes a part of the public record. This means that anyone can obtain a copy of your Will and determine your devisees. In addition, your personal representative may also file with the Court an Inventory and Appraisal of all your estate. By utilizing a Trust, you are able to protect the identities of your beneficiaries and amounts of their potential inheritance.

Management and Distribution of Trust Assets

As a mother of two small boys, one of the most important benefits of a trust for me is my ability to direct the management and distribution of Trust assets if something should happen to my husband and me. There are so many “ifs” to consider when creating a trust when you have children, such as what if they are still minors when we die, what if one is in college and the other is still in high school, what if one child is really irresponsible with money and the other is very responsible, and what if one has a substance abuse problem. We may not be able to predict who our children are going to be when they grow up, but with a trust we are able to address some of the ifs. Because the trust is amendable, we are able to change the terms of the trust when the ifs becomes certainties later down the road and still protect the terms of the trust from becoming part of the public record.

A trust is a great estate planning tool to manage the ifs in life. If you have a trust, it is highly recommended that you review the terms of the trust at least every two years to see if it needs to be updated to reflect the changes in your life and the lives of your beneficiaries. If you don’t have a trust, contact our office to see if maybe a trust would answer some of your estate planning concerns. We are here to help.

Laura M. Trujillo
ltrujillo@mclawfirm.com 

480-994-2000