In previous months I discussed the fact I am often asked by people, “Why do I need a will?” The second question I am often asked is, “Should I have a trust?” This is often followed by the question, “Can I have a trust in place of a will?” There is no simple answer to these questions. A trust, like the need for a will, varies depending upon age, assets, and whether or not you are married or have children.
While most people do need a will, a trust is a different matter. Generally if you have minor children and assets it is a good idea to have a trust included in your will. This is called a testamentary trust. This type of trust comes into being after your death in accordance with your will. Usually in this type of trust the property is left to the surviving spouse by the will. However, if there is no surviving spouse the estate is placed in a trust to be managed for the benefit of the minor (and potentially adult) children.
Benefits of a Trust
If you die while your children are still minors, you can use your will to put their inheritance in a trust. This means a third party will make the decision about the investment of your children's funds and payment to them. And you can maintain funds after your child is past the age of eighteen. Without a trust, on their eighteenth birthday, children can demand their share of the inheritance for that shiny new car rather than for their education. You may also want to pass some of your assets to your grandchildren. By setting up a trust, you can be assured that happens.
Revocable vs. Irrevocable Trusts
A trust can also be set up while you are still living, called a living trust or inter vivos trust. There are two types of living trusts a revocable trust or irrevocable trust. As the name suggest a revocable trust can be changed or revoked at any time before death. An irrevocable trust cannot be revoked after being funded (with some exceptions). The two types of trusts are treated differently for tax issues. You need to discuss these trusts with a professional. Tennessee also allows individuals to set up a living trust called an Asset Protection Trust which will protect your assets from claims by your creditors. Let’s say your job requires a lot of driving. This opens up the possibility of liability in case you were involved in an accident. By having your property in an Asset Protection Trust, you can protect your hard earned money in case of a lawsuit. A living trust can also be used for property you want to pass to heirs without going through probate.
With a trust, you can ensure that your assets are protected and will pass easily to your heirs without being whittled away by court and attorney fees if you leave these matters to chance.
Let us help you with your estate planning needs.
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