A common question we are asked is: how will I know if I need a trust? The first step is to meet with an estate planning attorney to determine if a trust is right for you. There are several factors that we look at to assess what estate planning tools are appropriate for an individual or a couple. An estate plan is not one size fits all. In some scenarios, trusts can be considered “over-planning”. So, what are some of the factors?
Most times, when we ask someone if they want to avoid probate court, the answer is yes. If this is the case for you, a trust MIGHT be something to consider. Another factor concerns the types of assets you have: a family-owned business? real estate? mostly retirement accounts? What about the total value of ALL your assets? This can determine whether you need a trust AND what type of trust is best for you.
What about minor beneficiaries? Listing minor beneficiaries on your various accounts and policies is not a good idea. It will result in a court-appointed fiduciary to manage the assets for them. Listing an adult individual as the beneficiary in hopes that they will use the money for the benefit of the minor children is also not a good plan. There will be no checks and balances in place. Minor beneficiaries are certainly a reason why you may consider a trust.
What about beneficiaries that are not minors, but you are concerned about them receiving a lump sum of cash, or you would like to restrict how they use the funds they receive? This would necessitate a trust. But what type? There are several types of trusts, including standard revocable living trusts, retirement benefits trusts, A/B trusts, and much more. Your individual circumstances will determine first, whether you need a trust and second, which type of trust is right for you.