Show #425 Airing Sunday, 3/16/08
You’ve probably heard about wealthy folks like Leona Helmsley creating trusts. But should average, every day people, people without much money, should they have a trust? Here to explain why a trust may be the right plan for you, even if you don’t have money, is my trustworthy law partner, Jennifer Peck.
Question: Are trusts just for wealthy folks?
Answer: No. We hear in the news about rich people who make trusts to avoid paying millions of dollars of estate taxes. And that certainly is a wise use of trusts. But trusts can be helpful, in many cases, for people with very modest assets.
Question: Why would anyone with very little money ever need a trust?
Answer: I’ll give you two examples.
First: if you have young children, or you would like to leave something to young grandchildren, a trust may be the best approach. It may not be smart to leave an inheritance, even a small inheritance to a youngster. With a will, that youngster would get sole control of any inheritance at age 18 or possible 21. But no longer than that. And kids are often not very smart about managing money at that age. If they get the money at a young age - even just 10 or 20 thousand dollars, it may be gone in one wild weekend.
With a trust, and only with a trust, you can leave an inheritance to be managed by someone else, maybe a sibling or cousin, until the youngster reaches any age you pick. So if you want to keep your grandchild’s inheritance under the control of someone who’s more mature, at least wait until the youngster is 25, or 30, you’ll need a trust.
Second is in the case of a child, of any age, who’s disabled. A trust is the only way to safely provide management for an inheritance left for a disabled child. And a trust may be necessary to allow your disabled child to qualify for Medicaid, SSI, and other public benefits.
Question: Any other reasons to use a trust with a very modest estate?
Answer: Yes. There are lots of possible situations. For example, if you have a child in a questionable marriage, if you have a child who’s married to a bum, if you have a child who is in a second marriage, if you have a child who has financial problems or is in a line of work susceptible to lawsuits, if you have a child who is ill – in all these cases, a specialized bloodline or SAFE trust may be the only way to protect an inheritance for your child and grandchildren.
Question: You haven't mentioned probate?
Answer: Lots of people get trusts to avoid probate. And trusts can avoid probate. But if you have only a very modest estate, a trust may not be the best approach to avoid probate. Joint ownership or beneficiary designations may be a better way to avoid probate.
Trusts are not for everyone. But to make a decision whether a trust is best for you, speak to an estate attorney. And pick one who is trust-worthy.
Trusts offer benefits even if you’re not wealthy. But they are not for everyone. For more information, give Jennifer a call.
