Who needs a trust as part of their estate plan?  The short answer is, anyone who wants to protect their assets and govern the spending of them.  You might already have a last will and testament, but a trust might be a valuable addition to your plan.  Whereas a last will and testament is still subject to probate proceedings, a properly funded and drafted trust avoids the often steep costs associated with probate and can specify exactly where assets go and how/when they are used.  A trust allows a third party, or trustee, to hold, or manage, those assets.

When is a trust useful?  Trusts are valuable additions to your estate plan if:

  1. Your beneficiaries are minors and/or unable to handle their own finances.

You can have a trust for minor children prepared by your attorney that will specify at what age the children can take full control of the assets.  Absent a trust, your child’s inheritance is legally theirs at the young age of eighteen.  You can also name a guardian for your minor child, in the event that you die before they are adults.  If you are worried that a beneficiary might mismanage a large sum of money, a trust can provide for care and support over time while protecting the assets from being wasted.

  1. A beneficiary is disabled and receiving Medicaid or SSI.

People who receive Supplemental Security Income (SSI) are only allowed to have a certain amount of assets of their own. An inheritance of a large sum may mean that the person cannot receive SSI until all but that amount is spent.  A Special Needs Trust can be used to provide things for the beneficiary that SSI does not cover such as computers, furniture, transportation, or even vacations.

  1. You are part of a blended family.

A trust can allow your spouse to initially inherit property or money after your death, and ultimately after his or her death go to your own children.  Your attorney can help you determine the best way to make sure your assets end up exactly when and where you specify.

  1. You want to avoid estate taxes on large estates.

As of 2020, only estates valued at $11.58 million or more must pay federal estate taxes.  And the state of Arizona does not impose its own estate or inheritance tax.  An irrevocable trust can stipulate that funds are moved to appropriate beneficiaries to avoid certain taxes.

  1. You want to control physical assets/property.

If you have real estate, tangible property, or fragile natural assets, a trust can be the “owner” so that several beneficiaries can all use them.  A good example is family vacation property. If the trust owns the property, money can be set aside within it for maintenance or even require contributions from the family members towards that maintenance.  The trustee (rather than individual family members) will be responsible for managing and scheduling use of the property.

If you would like help deciding if a trust is best for you, or you already know you need one and would like to set it up, please contact Alan Soelberg at Davis Miles McGuire Gardner. There are several different types of trusts, and Alan has years of experience with estate planning and will help you come up with the very best legal plan for your estate.