By: Anthony J. Enea, Esq.
All too often a client will tell me that they don’t believe they are wealthy enough to use a trust as part of their planning. Unfortunately, this belief is incorrect and a misunderstanding of the purpose and benefit of using a trust. Perhaps, the phrase “trust fund baby” has helped perpetuate the misconception that it is a vehicle for the rich only!
A Revocable Living Trust (RLT) is a planning tool that can accomplish everything a Last Will & Testament can with respect to the disposition of assets titled in the name of the RLT. Additionally, any estate tax planning that can be done in one’s Last Will can be done in a RLT with the added benefit of not needing to go through the probate process. A RLT is a writing wherein the creator/grantor of the trust can also be the sole trustee. During the lifetime of the trust’s creator, they have full control over the real property, savings and investments that have been titled in the name of the trust along with the power to amend, modify and/or revoke the trust. In order to make the trust a valuable planning tool and to be able to avoid probate at one’s death, it is necessary that one’s assets be titled in the name of the trust. If one is affluent and concerned about estate taxes, the RLT can also contain provisions such as a credit shelter trust, disclaimer trust, and any other provision available to engage in estate tax planning.
As previously stated, the use of a RLT avoids the need to probate one’s Last Will which must be admitted to probate in the Surrogate’s Court in the County where the decedent resided in order to be deemed legally valid. The probate process can take approximately nine (9) months to one (1) year to complete, there are filing fees to be paid to the Court, legal fees to attorneys and one’s estate is a matter of public record. All of these expenses, difficulties and delays can be avoided by utilizing a RLT that is properly drafted and funded.
Additionally, an Irrevocable trust (not Revocable) is a planning tool that can be used to transfer assets for the benefit of another as well or to protect one’s life savings and home from the cost of long-term care. It allows one to shelter assets (house/non-IRA savings) from the cost of long-term care, while allowing the trust creator to continue to reside in the home and still benefit from the income generated by the assets transferred to the Irrevocable trust. Additionally, an Irrevocable trust can be used to transfer assets for the benefit of a loved one, friend, child and/or grandchild so that the assets are beyond the control of the trust’s beneficiary while the trustee(s) can still use the trust assets and income for the health, education, maintenance and support of the beneficiary. This is an excellent tool often used for the education of a grandchild and/or child.
As illustrated above, trusts whether Revocable or Irrevocable are valuable planning tools. Being rich is not a prerequisite!