Many people come into our office and are adamant that they need a trust. They aren’t sure what kind of trust, or what exactly a trust does, but they know they need one. More and more, I find myself explaining to them that they don’t really need a trust. Often, they will spend more money and more time in upkeep of a trust over the years than it’s really worth. Here are a few situations on when you can really benefit from having a trust.
- If you have children under 18. One of the advantages to having a trust is that it automatically controls the property inside the trust. So when a parent passes away, the trustee is able to use the trust funds immediately for the benefit of any minor children. The trustee can pay for medical bills, rent, utilities, gas, groceries, etc. Also, a lot of parents feel their child isn’t ready to receive their entire estate at the age of 18. They have visions of their child having massive keggers and parties and fast cars and then pretty soon, the child is broke. A Trust can hold assets after the child turns 18. Often, we will structure a trust so that it distributes the assets to the child at the age of 25 or 30, or when the child earns a bachelors degree. The conditions on when a trust distributes the funds to a beneficiary can really be tailored to the client’s wishes and needs.
- If you have one spouse that is the breadwinner, and the other spouse does not work. For the same reasons as above, a trust can be great in case the breadwinner spouse passes away and the stay at home spouse survives. The stay at home spouse will need access to the funds immediately to pay basic bills. Having that instantaneous access to the trust assets can be a lifesaver, rather than having to wait months and months for probate to finish.
- If you own property outside of Texas. If you own real estate outside of Texas or in multiple states, you will need to probate in some form in all those states. So if you own real estate in Texas, Oklahoma, Michigan, and Rhode Island, when you pass away or your spouse passes away, probate will have to be done in all four states to transfer title. If you have a trust created while you are living and transfer title to all those properties to the trust, no probate will be necessary because the trust already own the property.
- If you have a special needs child. Your child can really benefit from having a special needs trust because it allows them to qualify for government benefits while still benefiting from your hard work and assets. Instead of the state getting your estate, it is placed in a special needs trust and pays for your child’s needs up and above what the government benefits pay for. It provides a better life for your child.
- Finally, if you are worth more than 5.43 million this year you may benefit from having a certain type of trust. Most people do not fit into this category so it’s not often a benefit.
A trust is more expensive than a Will because it takes more time to set up and requires more upkeep on an annual basis. A trust can also be more hassle when it’s actually time to probate, because now you’re having to probate the Will (for assets that were not placed in the trust while you were living) and then the assets are transferred to the Trust, and then transferred to the beneficiaries. Sometimes having that extra step of the Trust is redundant and only acts to build up the costs. Not everyone needs a trust. There have been a lot of updates to the Probate process in Texas over the last few years, eliminating a lot of the reasons people were getting trusts in the past. There is greater privacy in the Probate process now for your assets. Payment on Death beneficiary designations act immediately and outside of Probate. A properly structured estate plan oftentimes doesn’t need a Trust.
Blaise Regan is a Partner at Regan & Frisbie, PLLC, a law firm focusing on Wills, Trusts, Probate, Contracts, Business Formations (LLC, Corporation, S-Corp Designation), Business Disputes, DTPA claims, and Consumer Litigation.
Regan & Frisbie, PLLC is located at 7160 Preston Road, Suite 100, Plano, Texas 75024.
Comments or questions, feel free to email him at Blaise@RFPlawfirm.com or call him at 469.200.4737.