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Is A Trust Rally Necessary?

_ June 8, 2022

I’m sometimes asked by potential clients, is a trust really necessary? People have heard they were only for wealthy people, too complicated and time-consuming to create, and expensive. These are all valid questions but I think it’s best to start with an understanding of what a trust actually is.

What is A Trust?

A trust is a legal arrangement that lays out who, when, and how your assets are to be distributed. Trusts also can be created that take effect during incapacity, a feature that is unavailable for a will because a will takes effect only upon death. 

The Probate Process

One might ask, although it’s great that a trust can be created to distribute my assets upon death, isn’t it the case that this is exactly what a will does, so why create a trust? Again, another great question. There are three major reasons that a will might want to be avoided when a trust can be created.

Probate: One of the biggest reasons a trust is preferable to a will is that, if funded properly, a trust avoids probate, whereas a will is required to go through the probate process. In some jurisdictions, probate is straightforward and isn’t overly time-consuming or expensive for a will that doesn’t have a complex distribution scheme. However, in other jurisdictions, probate can take quite a while (12-18 months) and complex factors can lead to additional delays.  Probate is also a public process that can lead to increased scrutiny or a contest to the will. Probate also makes public information that you may not want in the public domain. 

Incapacity: According to the National Institute of Health, approximate two-thirds of Americans experience some level of cognitive impairment by the age of 70. Given that average life spans continues to increase, a trust becomes much more important for people as they age because a trust, if funded properly, can stipulate how assets are used during times of incapacity. A typical trust I create always contains these important provisions. With advanced planning, assets can be shielded against having to pay for government benefits but this is beyond the scope of this article. 

Specificity: A trust is an incredibly flexible instrument, in that it allows one to create any number of special trusts that can help you realize goals such as efficient charitable giving, estate tax minimization or special needs trusts that help loved ones. Some items of these trusts can be included in a revocable living trust, or additional trusts can be created.

How expensive is a trust compared to a will?

Excellent question! I would answer this by first determining whether an online will or trust can be created. If this is the approach you want to take, the initial cost can be quite low. However, (and yes, I’m biased!), the ultimate cost can be quite significant. I’ve had clients that incorrectly created an estate plan use an online service and the still-ongoing results include large attorney fees and increased family disagreements. In addition, working with a professional can help to answer questions that you might not be thinking about. Remember, estate planning is all I think about – day-in and day-out, so I’ve encountered situations that you might not be aware of that give me the increased experience to know the questions to ask you in our meetings. If you choose to work for an attorney, the cost for a complete estate plan should start at a few thousand dollars, but probably no more than $10,000 for a plan that addresses complex situations and ensures that your trust is funded. Some attorneys, such as myself, charge a flat fee, so there are no surprises bills. The cost isn’t insignificant. But I would humbly ask: is the price of a couple of iPhones or a nice vacation worth the peace of mind in taking control of your estate plans? Finally, the additional costs you will incur if legal assistance is needed in the probate process can be substantially more than the cost of a proper estate plan.

I hope this blog has assisted you in understanding what a trust is, and please leave a comment or contact me if you have additional questions. Thanks!  

The information on this blog is for general informational purposes only. Nothing on this or any other communication should be taken as legal advice for any individual case or situation. All information on this site is not intended to create and does not constitute an attorney-client relationship.