Trusts were once the cornerstone of most estate plans, due largely to tax planning when the estate tax applied to estates of $1,000,000 or less. Now, where a person can leave more than $11,000,000 free of estate tax (updated for 2018), Trusts are not always necessary. However, Trusts still provide a great degree of flexibility and long term control that simply cannot be matched by a Will alone.
Trusts provide the following key benefits:
- Privacy. If your estate is properly structured, a Trust can allow your estate to be settled without court involvement or the associated public records. Contrast that with an estate relying solely on a Will, which must be deposited with the clerk of court and will be available for public inspection, and will require probate which also generates many public records. However, many modest estates can achieve this same result with the help of a good lawyer and creative asset titling.
- Avoidance of Probate. Probate is the court supervised settlement of your estate. In Florida the process typically runs less than one year, and the cost for a “typical” probate administration is often only a few thousand dollars. There are some benefits to probate, such as formal determinations of exempt and homestead assets, and for most people it is not an unduly difficult process. However, if your estate is properly structured a Trust can be the key device for avoiding probate altogether. That said, assistance from a lawyer is still generally necessary to administer a trust. Also, again many modest estates can achieve this same result with the help of a good lawyer and creative asset titling.
- Avoidance of Probate in Other States. If you die owning real estate in another state then you will need a probate administration in that state as well. If that property is instead held in a Trust then the additional “ancillary” probate administration can be avoided.
- Long Term Control. There is no great substitute for a Trust if you want to provide for long term management of your estate, whether for future generations of your family or for current beneficiaries who cannot manage the money on their own. There are many considerations when structuring a Trust for long term function, and it is critical to work with a good lawyer to prepare the Trust in such a way to best anticipate and adjust for future changes to the law and to those people who are involved in your trust, from the trustees to the beneficiaries.
- Protection. A trust can provide for management of your property if you become incapacitated. A trust can also serve to protect beneficiaries who receive needs based assistance or who may have creditor problems.
- Flexibility. A Trust can be drafted to allow more flexibility in its administration, so long as you have trusted people to whom you are willing to give discretion in managing Trust.
- Incapacity Planning. If you become incapacitated it is often easier for your successor trustee to step in for you under a Trust than for your attorney-in-fact to gain authority over your assets by invoking a durable power of attorney.
If you already have a Trust, be sure to review it periodically with your lawyer. Changes in your circumstances and in tax laws may affect how your Trust would now function. For example, many Trusts were drafted with a credit shelter or family trust provision funded based on the lifetime credit or lifetime exclusion amount. The effect of that provision when the exclusion was less than $1,000,000 is vastly different than now, and will often lead to an unnecessary division of assets where it is no longer desirable.
