A “Trust” is Not Always the Right Answer

If you do a search for “estate planning” one of the most common responses will be a “trust.” No surprise, it is one of the most common, and core, tools used in estate planning. Often times you will see the words “revocable living trust” when it comes to estate planning and has almost become synonymous with estate planning. But is it always the right answer? Not always, and it isn’t a “one-size fits all” approach.

One of the biggest issues today with “trusts” is not that they don’t work or aren’t a great tool, it’s WHO is using the trust and WHY that becomes the issue. Many non-attorneys have been using them as a way to get new business because they are such an accepted method for protecting assets. When so many people are using them, there is a high risk they may not be used in the right way, for the right people, and for the right purposes.

So why wouldn’t you want to have a revocable trust? In some states, the process of going through probate for relatively small estates is cheap and easy.  Therefore, there is no reason to avoid it with a trust or any other legal instrument. For certain people, this can solve their issues without the need for more legal documents.

Another potential problem with trusts is choosing the wrong person as a trustee. This can result in a potential disaster for the person that can often times be difficult to fix. When you decide a trust is right for you, it is also equally important that the trustee is right for you as well.

There are some times when trusts are the best option as the Wills, Trusts & Estates Prof Blog discusses in "Estate Planning, Is a Trust Beneficial?"

There are many situations where having a trust in place is an excellent idea…usually more times than not having a trust. But the key to remember is that a trust is just a tool, not the solution. The solution lies in the discussions and personal decisions that go into Estate Planning. Once the end goal is determined, then the tool of the trust can be used wisely.

Situations where a trust could be a good idea include such situations as when you have a blended family and want to leave assets for your spouse, while making sure that your children from a previous marriage will also have something to inherit. Another example could be if your intended beneficiary is not responsible enough to handle money or has a lot of creditors. And Trusts can also be an effective tool to help with estate tax issues. So while there are lots of reasons for using a trust, it is critically important to first understand “why” you really want a trust. It should be a part of your plan, not just a tool you use.

To really know whether a trust is right for you and should be part of your overall estate plan, talk to an estate planning attorney. After discussing your personal needs, they will be able to determine if this is one of the many tools that may be right for you and your needs.