When Do You Need a Trust, and What Type Should You Have?
A trust can be an excellent solution to many potential estate problems: when you fear that a beneficiary cannot handle the responsibility of an outright gift; when you want to place restrictions or conditions on property ownership; or when you want to protect assets from creditors and predators. The type of trust best suited for your estate plan will vary with your circumstances. The following examples can help you decide if you need a trust, but your estate planning attorney is ultimately the best person to recommend the most appropriate trust for you.
Guard against legal and financial problems. Trusts are often used to smooth the difficulties associated with disability and old age; protect you (or your children or grandchildren) from the financial consequences of failed marriages, bad business decisions or other legal problems; avoid estate and inheritance taxes; reduce income taxes; provide professional investment and asset management; or prevent family assets such as farms and businesses from being unnecessarily divided or sold. Properly structured, a trust can also be beneficial in transferring property to a charitable organization such as Union College.
Protect your future care and comfort. You may have just retired and are receiving a pension, for example, but are unsure about your long-term ability to manage your money effectively. Establishing a revocable living trust and naming yourself as trustee allows you to control your finances. Then, you can name a bank, trust company or responsible individual as a "backup" trustee. If you become disabled or for whatever reason cannot or do not want to handle the trust assets, the backup trustee will take your place.
At your death, place all or some of your assets in a marital trust for your spouse. A marital trust offers many advantages if your spouse is not accustomed to managing large sums of money, is not a citizen of the United States or is not the parent of all of your children. A marital trust may also benefit you if your total assets exceed the estate tax exemption amount (although federal estate taxes are repealed for deaths occurring in 2010, the exemption amount is $1 million in 2011 and beyond). If you are married and have children from a previous marriage, you can establish a qualified terminable interest property (QTIP) trust to provide for your spouse at your death and for your children at your spouse's subsequent death.
Provide for minor children and grandchildren. Among your many options in providing for children and grandchildren, such as custodial accounts and guardianships, a trust is often the best choice. A trust can distribute income to your children in the manner and at the ages you select, unlike a custodial account in which funds are distributed to children when they reach the age specified by state law (usually 18 or 21). A trust can provide for your children's education and treat them equitably—but not necessarily equally. A special needs trust may be the best means of providing for a disabled child's needs and preserving his or her government entitlements.
If you have a deceased child who is survived by a spouse, you can establish a trust for your son-in-law or daughter-in-law during his or her lifetime, with the remaining trust assets reverting to your grandchildren (or other family members) at your in-law's death.
Trusts can be designed to fit almost any set of circumstances, assuring flexibility, reliability and confidentiality based on your goals. Please call us if you would like to make a gift to us by including Union College in your trust. We would be happy to confidentially discuss your intentions with you and your advisors.
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The information on this website is not intended as legal or tax advice. For legal or tax advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes apply to federal taxes only. State income/estate taxes or state law may impact your results.