Caring for children with special needs, protecting inheritance, maximizing tax planning - these are all reasons that many people consider including trusts in their estate plans. There are more, obviously, because a trust can so often help provide a solution to a wide variety of estate planning needs. The problem for most people, perhaps even some of our Michigan readers, is that there is a certain air of mystery around trusts and trust administration, which can leave some people in a position where they do not even consider the benefits of establishing a trust. A recent article recognized this problem and addressed some of the basic questions people have about trusts.
Trusts are used not only as part of planning a distribution of assets after death, but also for transferring assets during life for maximum tax efficiency, i.e., to pay the least amount of taxes as possible. One common type of trust is the revocable trust, which allows the person who establishes the trust to make changes as needed, or to completely end the trust if required. An irrevocable trust is obviously just the opposite, wherein once the trust is established it is very difficult, if not impossible, to make any changes at all.
One of the biggest questions for those considering establishing a trust is, who will run it? A person might think that they should name someone they know and trust, like when they name an executor for a will, but a trust is a whole different animal. Many people who are involved in this particular area of estate planning would likely advise naming a specific financial institution as the trust administrator, as is the case in the recent article. The article makes the key point that, unlike when a specific person is named, naming a specific institution instead means that some issues with the continuation of the trust will not come up - a specific person will age and die, while an institution does not. And, many financial institutions have whole areas of their company that are devoted to trust administration.
Whether or not a person believes a trust will be right for their situation is up to each individual. But for many people a trust is not only something to think about - it is almost a necessity.
Source: Smart Business, "How to tailor trusts to meet your needs and care for beneficiaries," Susan L. Nelson, June 1, 2013