Although many people equate “estate planning” with simply having a will, there are many advantages to having a trust as the centerpiece of your estate plan. While there are other estate planning tools (such as joint tenancy, transfer on death, and beneficiary designations, to name a few), only a trust provides comprehensive management of your property in the event of your legal incapacity (not being able to make financial decisions for yourself) or death.
One of the primary advantages of a trust is that it provides the ability to bypass the publicity, time, and expense of probate. Probate is the legal process by which a court decides the rightful heirs and distribution of assets of a deceased through the administration of the estate. This process can easily cost tens of thousands of dollars (and sometimes hundreds of thousands) and take a year or longer to resolve. Or course, not all assets are subject to probate. Some exemptions include jointly owned assets with rights of survivorship as well as assets with designated beneficiaries (such as life insurance, annuities, and retirement accounts) and payable upon death or transfer on death accounts. But joint tenancy beneficiary designations don’t provide the ability for someone you trust to manage your property if you’re unable to do so, so they are an incomplete solution. And having a will does not avoid probate.
Of note, if your probate estate is small enough – or it is going to a surviving spouse or domestic partner – you may qualify for a simplified probate process. In California, if your assets are worth $150,000 or more, you will likely not qualify for simplified probate and should strongly consider creating a trust. The cost of probate should also be a factor in your estate planning as creating a trust can save your heirs both time and money, not to mention emotional stress. Moreover, if you own property in another state or country, the probate process will be even more complicated because your family may face multiple probate cases after your death, one in each state where you owned property – even if you have a will. But beyond all of that, probate is a court proceeding and a matter of public record. That means your loved ones will have zero privacy. A trust, on the other hand, creates privacy which helps avoid conflicts, legal challenges, and keeps assets and beneficiaries hidden from potential predators.
A common reason to create a trust is to provide ongoing financial support for a child or another loved one who may not ever be able to manage these assets on their own. Through a special needs trust, you can designate someone to manage the assets and distribute them to your heirs under the terms you provide. Giving an inheritance to an heir directly and all at once may have unanticipated ancillary effects, such as disqualifying them from receiving some form of government benefits, enabling and funding an addiction, or encouraging irresponsible behavior that you don’t find desirable. A trust can also come with conditions that must be met before someone receives the benefit of the gift. Furthermore, if you ever become incapacitated your successor trustee – the person you name in the document to take over after you pass away – can step in and manage the trust’s assets, helping you avoid a guardianship or conservatorship (sometimes called “living” probate). This protection can be essential in an emergency or in the event you succumb to a serious, chronic illness. So unlike a will, a trust can protect against court interference or control while you are alive and after your death.
Remember, trusts are not simply just about avoiding probate. Creating a trust can give you privacy, provide ongoing financial support for loved ones, and protect you and your property in the event you are unable to manage your own assets. Simply put, the creation of a trust puts you in the driver’s seat when it comes to your assets and your wishes as opposed to leaving critical life decisions to strangers, like a judge.
Dedicated to empowering your family, building your wealth, and securing your legacy,