Trusts are powerful instruments that have many good uses; but Trusts are
also the most misunderstood and exploited instrument in the Trusts &
Estates attorney’s toolbox. Wills are a close second. In both cases
there are scads of lawyers, professionals, and websites that will promise
to help write a Will or establish a Trust. Problem is, just because your
cousin is a lawyer, that doesn’t mean your cousin will draft a good
Will or an effective Trust. A cheap Will is not always an effective Will.
Just because the operators of a financial seminar sold you an expensive “
Revocable Living Trust
” as your super-planning probate-and-lawyer-avoiding document, that
does not mean the Trust will work for your planning needs.
Trusts are great, if utilized correctly. Here are just a few examples:
● If you’re entering an upper tax bracket this year, congratulations.
You’ll probably have to pay more income tax, unless you reduce your
taxable income before filing your tax return. A Trust could help here.
● When a life insurance policy pays out to beneficiaries under age 18,
a Trust must be created by law for management of the Minor's insurance monies.
● When the in-laws or step-family is ready to pounce on the possessions
and divide the assets of the soon-to-pass family money-maker, a private
Trust agreement to handle the distribution is often the best way to keep
out the greedy brood. A Trust agreement is private whereas a Will is public
once it’s filed for Probate.
● If your friend needs to qualify for assistance, like Social Security
Disability Income (SSDI) or Supplemental Income, a Trust can often be
the recipient of enough income to lower the reportable income of the applicant
to qualify for the assistance.
● If a person receives a lump sum settlement check for disability insurance,
often there is a big income tax IRS bill that comes with the check. If
the check is paid to a trust for the person’s benefit and with specific
standards, then the tax bill may be deferred or never assessed.
● If you are under creditor attack and are about to receive an inheritance
or other lump sum, a Trust benefiting you, would be the better recipient
of the inheritance because the creditors cannot touch it.
● Other purposes include sheltering monies for a surviving spouse; Management
of monies for surviving children; benefiting a charity; creating a legacy.
Trusts are not just for the management of a wealthy decedent’s estate.
They can help people just like you and me.