Show #253 Airing: Sunday, April 25, 2004
Should you have a trust, or is a will sufficient? Are trusts only for rich people? Do you need a bank trustee? Trusts are a very popular estate planning tool. But there’s a lot of untrustworthy information out there about trusts. To help upgrade your knowledge, my trusty law partner, Mike Solomon, has prepared a trust test. So get a pen and some paper to play along with us. Trust me, this will be worthwhile.
Question: Let's get right to it. Our viewers should indicate which statements are true or false.
FIRST IS: EVERYONE SHOULD HAVE A TRUST.
Answer: This is false. Many people today are using trusts to avoid probate. But trusts are expensive, and there may be less costly ways to avoid probate, such as joint ownership or beneficiary designations.
2. TRUSTS ARE ONLY FOR RICH PEOPLE.
Answer: Again, this is false. Now, rich people do often use trusts to reduce or eliminate federal estate or death taxes. But trusts provide lots of benefits that have nothing to do with a person’s wealth.
3. TRUSTS ARE THE ONLY WAY TO PROTECT AN INHERITANCE FOR YOUR KIDS AND TO KEEP IT FROM THE KIDS’ SPOUSES.
Answer: True. Normally, with a will or joint account or beneficiary designation, your assets go to your kids outright. If they later get a divorce or die, your estate, or at least part of it, is likely to end up with your child’s spouse. If you want to leave an inheritance for your kids but keep it from their spouses, you’ll need a trust.
4. TRUSTS CAN SAVE OHIO ESTATE TAXES.
Answer: This is true. Ohio has its own estate or death tax, apart from the federal death tax. Only wealthy people have to worry about federal death taxes. But the Ohio death tax hits anyone with an estate over $338,000. If you are worth more than $338,000, trusts can save you thousands of dollars of Ohio taxes at death.
5. A REVOCABLE LIVING TRUST CAN SHELTER ASSETS FROM NURSING HOMES.
Answer: False. Despite promises by some people trying to sell trusts, a standard revocable living trust provides no protection from nursing home costs. But there is a specialized trust, called a Medicaid Trust, which can be used to protect assets from Medicaid and nursing homes.
6. TRUSTS PROVIDE PROTECTIONS IN SECOND MARRIAGES.
Answer: Here the answer is true. If you just leave everything to your spouse, he then can leave the assets to his family, cutting out your kids. But with a marital trust, you can leave your assets to benefit your spouse while he’s alive, while making sure your kids from a prior marriage are also protected.
How’d you do? If Mike’s test gave you trouble, you’d better watch Golden Opportunities every week. There’s no better education. And if you knew the answers, well, watch the show anyhow. That’s probably why you knew so much!
