If you are asking the question, the chances are that you should. Living Trusts are, without question, the most powerful, flexible planning tool that we have. There is no other tool that, if properly used, avoids probate, provides disability management, provides asset protection for children, enhances privacy, and are easy to modify as your situation changes.
It is easy to focus on the cost savings associated with probate avoidance. This is certainly important, but to focus only on this may cause you to overlook the many other benefits available.
For instance, proper Trust Based Planning can prevent your hard earned money from falling into the hands of a divorcing spouse of a child. It can also protect it from other creditors if your child has money problems.
You may build in incentives for children (other beneficiaries, too).
These are only two of many examples.
Normally there are two drawbacks to establishing a Trust Based Plan:
- The up front cost is certainly higher than other planning arrangements; and
- There is more work involved in the initial establishment of the Plan
Some of the factors that make use of a Trust appropriate include the following:
- Overall “Death Estate” value – This means everything, including life insurance, retirement plans, and other death benefits. We used to use benchmark values for this, but have long ago discovered that there are exceptions to every rule. Don’t automatically assume that your estate is too small.
- Second marriages, blended families, etc.
- Desire for privacy
- Children or other beneficiaries who have financial problems, or who are likely to squander an inheritance
- Children or other beneficiaries in troubled marriages
- Children or other beneficiaries with “Special Needs”
- Desire to make the administration of the “Estate” as simple and easy as possible.
- Complexity of asset holdings (including insurance, etc.)
- Children or other beneficiaries who don’t get along.
- Ownership of businesses, farms, etc.
The list could go on, but that should give you an idea.
We are proud to be strong proponents of the use of Trust Based Plans. Many, many people should be using them that are not. Often when only one thing goes wrong, families wind up paying much more for not having a plan than if they had done things correctly. Don’t be penny-wise and dollar-foolish.