Do You Need a Trust?: Estate Planning Q&A

According to the 2023 Wills and Estate Planning Survey by Caring.com, only 34 percent of Americans have an estate plan.

Posted on June 2, 2023

The primary reasons respondents gave for not participating in estate planning are:

  • Procrastination
  • Believing they need more assets
  • Not knowing how to make an estate plan

An estate plan is a comprehensive set of legal documents and strategies that organizes assets for a person’s death or disability. Trusts are legal arrangements used in estate planning, alongside wills and advance directives.

Trusts as an Estate Planning Arrangement

A trust allows one person, known as the trustee, to manage funds and assets for one or multiple beneficiaries.

Trusts can be revocable or irrevocable.

  • Revocable trusts allow the grantor – the person creating and funding the trust – to change it during their lifetime.
  • With an irrevocable trust, the grantor cannot make modifications. Assets placed in this type of trust no longer belong to the grantor. Such trusts can therefore help someone qualify for government benefits, reduce their taxable estate, and transfer wealth.

Compared to wills, trusts can be more complex – and therefore more expensive – to set up. The value and utility of a trust will depend on your unique circumstances as well as the type of trust you use.

    FREE WEBINAR

    5 Things to Know About

    Estate Planning

    When You Turn Sixty-Five

    Save the Date

    Friday, Feb 23rd at 2:30pm


    FREE WEBINAR

    5 Things to Know About

    Estate Planning

    When You Turn Sixty-Five

      Save the Date

      Friday, Feb 23rd at 2:30pm

      Avoiding Probate

      A primary benefit of trusts is that they allow individuals to bypass probate, which can be time-consuming and costly for surviving loved ones. The court excludes property placed in trust from a probated estate.

      According to Legal Zoom, probate costs can consume 10 percent of an estate’s value. The process can also take months to years to conclude, burdening family members.

      Transferring assets outside probate via a trust also maintains privacy. The public can access probate records. The contents of a will might become publicly accessible since wills go through probate. But trusts, which stay outside probate, remain confidential.

      Other Benefits of Trusts

      In addition to avoiding probate, trusts can have tax benefits. By creating an irrevocable trust, individuals can lower the value of their taxable estate while transferring property to their loved ones.

      When you use a trust, you can have more control over assets than if you gave them to the recipient directly.

      • Those who wish to reward their loved ones for certain life events, like obtaining a college degree, can set up such stipulations in their trust.
      • Grantors with young children can set up a trust so that a child receives funds only upon attaining a certain age.
      • If a child’s marriage ends in divorce, the trust may shelter the assets as separate property.

      Benefits Eligibility

      Older people and those with disabilities can also use a type of irrevocable trust known as a Medicaid Asset Protection Trust (MAPT) to qualify for Medicaid.

      Individuals intending to use Medicaid to pay for long-term care may place into a MAPT certain assets that would otherwise disqualify them from Medicaid. Once Medicaid’s look-back period has elapsed, they can qualify for benefits. Since a MAPT is irrevocable, the grantor no longer controls and owns the assets. As they can assign beneficiaries, they can transfer and benefit from their wealth without first exhausting their assets to go on Medicaid.

      If you intend to rely on Medicaid in your retirement, consider speaking with an estate planning attorney to learn more about whether a Medicaid Asset Protection Trust could benefit you.

      Stay updated on how to protect everything you’ve worked for so hard during your life.

        Special Needs Trusts

        One type of trust that can be an invaluable estate planning tool for older adults with disabilities is a special needs trust (SNT). This type of trust can preserve the beneficiary’s eligibility for Supplemental Security Income and Medicaid while providing for needs that public benefits do not cover. The trustee can use the SNT to pay for things like caregiving, outings, and entertainment.

        Consult With Your Attorney

        While not everyone needs to create a trust as part of a solid estate plan, trusts can benefit many people in transferring wealth. Speak to your estate planning attorney to learn more about the optimal estate planning strategy for you.

        More from our blog…

        Navigating Disputes in Probate Court

        February 16th, 2024|

        When someone passes away, the probate process ensures that the deceased’s estate fulfills its debts and that the heirs receive their assets. The deceased’s will dictates [...]

        Recent blog posts

        FREE WEBINAR

        5 Things to Know About

        Estate Planning

        When You Turn Sixty-Five

          Save the Date

          Friday, Feb 23rd at 2:30pm