Trusts for the middle class: How to solidify your estate plan
A trust can help protect your assets.
A recent article by LifeHealthPro, a website geared towards providing resources for life and health insurance providers, notes that certain estate planning tools are more beneficial to the middle class than previously thought. More specifically, the article points to the benefits of using trusts.
A report by Marketplace Money, a website and radio program produced by the American Public Media and associated with the University of Southern California, supports this notion. It notes that trusts were once associated with “truly wealthy families” but that by the 21st century these flexible and complicated estate planning tools became useful to middle-class families as well. Of the many forms of trusts available, this piece notes the living trust is most popular.
What is a living trust?
Like all trusts, a living trust utilizes a trustee to manage the property for the benefit of another, the beneficiary. The trust is established by the grantor who transfers property into the trust. A living trust is one that is created while the grantor is alive, as opposed to trusts that are created at death.
What are the benefits of a living trust?
Living trusts can offer a number of benefits, but the primary draw is the potential to avoid probate. Probate is the court process that determines the distribution of assets at one’s death. Since the property in the trust is “owned” by the trust, not the creator, it does not need to go through probate at the creator’s death. Instead, the trust will pass along to listed beneficiaries. This process generally takes weeks as opposed to probate which often takes months. It also does not result in additional costs at distribution, like probate does.
Trusts also remain private, unlike wills. Wills go through probate and, as a court process, ultimately become a part of public record. Since trusts avoid this process the details of their distribution remains private. Depending on the details of the living trust, these tools can also help reduce estate taxes.
There are some negatives to using this type of trust. Some trusts provide protection against creditors, but living trusts generally do not. There are also some initial costs and completion of paperwork associated with setting up the trust.
Importance of legal counsel
Although there are many online resources that offer to assist in putting together these documents without the use of an attorney, it is wise to seek the counsel of an experienced revocable and irrevocable trusts lawyer. These legal tools can vary greatly and a “one-size-fits-all” approach may not meet your needs. In fact, a poorly drafted estate planning document can cost more in the long term. An experienced estate planning attorney will tailor the documents, better ensuring they reflect your desires.