By: Terry Bennett
In last week’s blog we discussed the differences between a will and trust (read more here). Before deciding if a trust is for you, we suggest asking yourself these three basic questions:
1. Do you have minor children?
If the answer is yes, then a trust may be the way to go. Without a trust, any funds left to minor children will be placed into guardianship accounts. A guardianship must be established by a court. Once established, only the guardian, who must present a request to the court and receive an order, can access the funds. No matter how reasonable the request may be, this process has to be followed in order to obtain the money. The guardian is also required to file an annual account with Probate Court summarizing all income and expenses.
It is also important to understand that funds held in guardianship accounts must be given to the minor children at age 18, even if the money is desired to go towards higher education and even if the child is not mature enough to handle the money at that time. Stories of 18 year olds receiving a large inheritance and spending it all in a couple of years are unfortunately common. This sad scenario can be avoided with some simple and affordable estate planning.
2. Do you have any children or grandchildren with special needs?
If you have an individual in your family with special needs that may inherit from you, a trust should be seriously considered. Often, individuals with special needs receive government assistance (Social Security Disability, Medicaid, etc.). Unfortunately, these government benefits could be eliminated or reduced if the person with special needs inherits money or property. To avoid this result, a qualified estate planning attorney can draft a type of trust called a “special needs trust.” This kind of trust can be structured so that your disabled child or grandchild can inherit from you without jeopardizing receipt of government benefits.
3. Will your estate be subject to estate tax at the federal level?
We also recommend a trust if the value of your estate exceeds the current threshold limit for the federal estate tax. In this case, a trust with special estate tax planning provisions is necessary. The threshold level changes frequently. Our estate planning attorneys recommend first concerning yourself with the family plan and then looking for the best way to structure a plan for tax planning.
It can be complicated to determine the benefits of a will vs. a trust. The estate planning team at Skeeters, Bennett, Wilson & Pike are ready to talk through your personal needs.