Many people are uncertain about why their friends or family have made the decision to set up a trust. We often hear comments like, “ I can’t imagine that their estate is large enough to justify the hassle and expense of setting up a trust.” A big part of this misunderstanding is that most people don’t know what a trust is. In years gone by, trusts seemed to be reserved for the wealthy, but they are now becoming important planning tools for people at all asset ranges. There are many reasons to use a trust. Here are a few:
- Probate avoidance. This is not the most important reason, but it is the reason most people think of first. Without a trust, when a person passes, the assets titled in their name must go through a process to retitle the assets to the appropriate people who’ve inherited them. This is commonly referred to as probate. It can be cumbersome and time consuming, especially when land or a house are involved. There may be substantial legal and court costs associated with the probate process, as well. A trust can be drafted to simplify or avoid this process.
- Privacy. A trust is a private document. A will, on the other hand, must be filed in the probate court before it is determined to be valid. Thus, everyone who wishes may know the contents of the will and the assets that were part of the probate estate. The nosy neighbor would know the dirty laundry and could spread the gossip. So, if a person is at all concerned about privacy, a trust will serve his or her needs better than a will.
- Incapacity planning. A will does nothing to help with incapacity planning. If the person making the will (testator) is not dead, the will does not control anything, even if the testator is incapacitated. Conversely, a trust can provide for the management of the assets upon the grantor’s incapacity. This is one of the great benefits of a trust compared to a will.
- Management. A trust can provide a vehicle for the management of assets during life and after death. Often, even if a grantor of a trust has capacity, he or she may reach a time in life when he or she no longer wishes to manage the assets. A trust provides a simple mechanism for this to happen. The grantor, who typically serves as the initial trustee, simply resigns and the person who was named as the successor trustee is notified and takes on the management responsibilities.
By Cindy Nelson, contributing writer and elder-care law attorney with Nelson Elder Care Law. LLC in Woodstock, Ga.