27-Jun-2013

by Melissa Morris

Does everyone need a trust?  No–many estates can be handled quite well with just a will.  Many times wills have to be probated, although not always, (if the decedent’s estate is small and does not hold any real estate.)    But there are many times that a trust can be just what the attorney ordered.

Situations in which  a Living Trust is needed or useful

1. When a beneficiary is unable to handle his/her own finances.

                Minor children                 

                Lack of business and financial skills.  

                Spendthrifts  

2. When a beneficiary is disabled and is receiving Medicaid  or SSI

3. When the person who is deciding between a will and a trust wants to control what happens to his/her property for a period of time after death.

                i.e. Life estate.

                Protection of fragile natural assets

                Making  tangible property or real estate available to many beneficiaries.

4. To avoid Estate taxes on large estates.

5. Blended families

Purposes for which a trust is not useful:

      To save on income  taxes

Finally, a trust  may or may not be useful:

      To simplify the process or reduce the expense of settling one’s estate after death.

 

This newsletter article will discuss numbers 1 and 2 above.  The rest will be addressed in the next two newsletters.

When a beneficiary is  unable to handle his or her own finances. 

    1. Minor children:   If you are making a will, and have minor children who could possibly inherit before they are old enough to manage their own money, you need not worry.   Davis Miles will prepare  a will for you  that includes a Trust for Minors.  In this document, you can name a guardian for your minor children, name a trustee to handle their inheritance until they are old enough to do so themselves, can give instructions on how the assets are to be managed, and can decide at what age you want your children to take full control of the assets.  There is no additional charge for this service.
    2. Lack of business and financial skills.    If you are leaving assets to a person who has not had the benefit of a good education, or who for any other reason is not good at handling financial matters, you may want to create a trust so that a more financially adept person can handle investment and distribution of the estate.
    3. Spendthrifts.  Some beneficiaries, for reasons of personality, addiction, or other issues, should not be given access to large sums of money all at once.  A trust can provide for the care and support of such a person, while protecting the assets from being wasted.
    4. Beneficiaries on SSI and Medicaid.   People with a medical condition that entitles them to receive Supplemental Security Income (SSI) are only allowed to have up to $2,000 in assets of their own.  If such a person inherits a substantial sum of money, he or she will probably not be able to receive SSI until all but $2,000 of the inheritance has been spent.

A certain kind of trust, sometimes called a Special Needs Trust, can prevent this.  The money in the trust can be used to provide things for the beneficiary that SSI does not cover such as computers, furniture, vacations or transportation.

Next month more on Trusts