Should I get a trust?

Adam Keilen

Should I get a Trust? The short answer – it depends. There are several factors to consider; primarily, trusts help clients avoid probate (saving time and money), thereby privately distributing assets upon the grantor’s death. However, not everyone needs a trust. Consider the following factors:

  1. How much of your estate will bypass probate? One of the main advantages of a living trust is being able to bypass the time and cost of probate (“probate,” definition: generally, assets are transferred from the decedent to the heirs; it is the process of administering an estate through the courts, a process that can take several months or years and can easily cost thousands of dollars). However, not all assets are subject to probate. For example, exemptions apply to jointly owned assets with rights of survivorship and assets with designated beneficiary forms, such as annuities, life insurance, and retirement accounts. Also, several states, such as Michigan, allow bank accounts to be “payable on death,” or “POD,” so beneficiaries can merely produce a death certificate and valid ID to access the account. Michigan also allows stocks and bonds to transfer-on-death (“TOD,” or “TOD” registration for securities).
  2. How expensive is probate? The short answer – again, it depends. In some cases, probate can easily add up to tens of thousands of dollars; in such cases, a trust is of course cheaper than going through probate. Talk with your estate planning attorney to get a better idea.
  3. Real estate. Owning substantial real estate can always be a good reason to set up a trust. If you own out-of-state property, the property will have to go through that state’s probate process with all the associated costs. Property owned in other countries adds another layer of complexity.
  4. Privacy – public disclosure. In addition to the time and cost of probate, when a probate estate/will plan is administered, it becomes public. A trust can protect your privacy with respect to the division of assets and related distribution matters – the distribution is done privately, and does not become public record.
  5. Minors – special needs. Another common reason to have a trust is to provide support for minors (your children) or to provide support for a loved one who may never be able to manage the assets themselves (spendthrift or special needs); notably, in some cases, providing inheritance assets can inadvertently disqualify special needs individuals from government support programs, so a special needs trust is a good option in such cases.
  6. Family discord; other goals. A trust also provides for a simple distribution of the assets, minimizing family discord. In addition, incentives for loved ones can be included; for example, additional payments to heirs for getting a college degree or starting a new business/etc.
  7. Taxable estates. If you have a taxable estate, in excess of $5,430,000 (as of 2015), talk with an estate planning attorney to develop strategies that prevent the liquidation of a business or other significant assets.

Ultimately, if you are considering a trust, talk with a qualified estate planning lawyer who can help you analyze and explore your options.