Should You Have A Trust?
By Lorri Malone
When tackling estate planning
issues, it’s important to know how
you would like your assets to be
distributed upon your death. One
means of doing so is by creating a
trust, a legal document that allows
you to stipulate what happens to
your assets.
Sounds like a will, doesn’t it? It’s
easy to get the two confused, but
there are some key differences
between a will and trust. And, some
financial advisors would say, key
advantages to having a trust in
place.
It takes three. The three main
people involved in a trust are the
grantor (person who owns the
assets), trustee (person who
executes the trust) and beneficiary
(those designated to receive assets
after grantor’s death).
Death makes the difference. Unless a trust is set up as an irrevocable trust, then both
a trust and a will can be amended and updated after the initial one has been
generated, says Virginia Payne, CPA. “The difference is the will becomes effective
after the death of the maker, but the trust becomes effective upon transfer of
ownership of property by the grantor to the trust. Also, a properly executed trust can
avoid probate. A will must always be probated.” In other words, you can amend and
update the trust during your lifetime and those changes will carry on when you die.
Trusts keep you out of court. Probate is the public legal process that activates the will
and gives the executor the legal capacity to act on behalf of the deceased. With a
trust, its administration need not go through the court system. “When the grantor of a
trust dies, the assets held in the trust are kept private,” Payne says. “And per the
instructions of the grantor, the assets are distributed by the trustee to the
beneficiaries.”
“One of the real benefits of having a trust in place is all the hassle of probate is
removed,” says Marcia Lewis, CPA, with Moore Stephens Potter LLP in Louisville.
She says a trust’s ease of administration can be especially helpful to those left behind.
“It’s simpler at the time of someone’s death,” Lewis says. “If you are mourning the loss
of a parent or spouse, for example, it can really save you the hassle of administration
and let the wishes of the deceased be carried out.”
Trusts can have tax advantages. With a typical will, Lewis says, your heirs get what
you have decided to leave them, which may mean they will have to pay estate taxes.
Depending on how a trust is drafted, “The provisions of the trust can have estate tax
savings.”
And there are several different ways to draft a trust. “There are many different types of
trusts: revocable, irrevocable, tax-motivated, tax-neutral, testamentary or inter-vivos,”
Payne says. “There is also a living trust which is a special trust subcategory – it is
revocable, tax-neutral and operates both during and after the lifetime of its creator.”
Get advice. With so many different types of trusts available and much information out
there, it’s important to get the right advice. “While it is possible to set up a living trust
on your own, especially with all the help and information available on the Internet, it is
still best to consult a tax advisor or estate planning attorney,” Payne says.
Lewis echoes that advice, recommending a financial planner with an estate
background who can take a “big picture” look at your situation, being sure to take all
your wishes and needs into consideration. You will still need an attorney to draft the
legal document.
No matter what, be sure to do something. Whether you choose a will or trust, just be
sure to have something in place so the assets you have worked so hard to build during
your lifetime don’t become community property upon your death.
“The importance of having a will is that if you don’t have it, the state of Kentucky will
decide what happens to your assets and that may not be what you want,” says Lewis.
“It’s important to get a will, even a simple will. Also, with greater assets, it’s even more
important to have something, a will or trust, in place.”
By Lorri Malone
When tackling estate planning
issues, it’s important to know how
you would like your assets to be
distributed upon your death. One
means of doing so is by creating a
trust, a legal document that allows
you to stipulate what happens to
your assets.
Sounds like a will, doesn’t it? It’s
easy to get the two confused, but
there are some key differences
between a will and trust. And, some
financial advisors would say, key
advantages to having a trust in
place.
It takes three. The three main
people involved in a trust are the
grantor (person who owns the
assets), trustee (person who
executes the trust) and beneficiary
(those designated to receive assets
after grantor’s death).
Death makes the difference. Unless a trust is set up as an irrevocable trust, then both
a trust and a will can be amended and updated after the initial one has been
generated, says Virginia Payne, CPA. “The difference is the will becomes effective
after the death of the maker, but the trust becomes effective upon transfer of
ownership of property by the grantor to the trust. Also, a properly executed trust can
avoid probate. A will must always be probated.” In other words, you can amend and
update the trust during your lifetime and those changes will carry on when you die.
Trusts keep you out of court. Probate is the public legal process that activates the will
and gives the executor the legal capacity to act on behalf of the deceased. With a
trust, its administration need not go through the court system. “When the grantor of a
trust dies, the assets held in the trust are kept private,” Payne says. “And per the
instructions of the grantor, the assets are distributed by the trustee to the
beneficiaries.”
“One of the real benefits of having a trust in place is all the hassle of probate is
removed,” says Marcia Lewis, CPA, with Moore Stephens Potter LLP in Louisville.
She says a trust’s ease of administration can be especially helpful to those left behind.
“It’s simpler at the time of someone’s death,” Lewis says. “If you are mourning the loss
of a parent or spouse, for example, it can really save you the hassle of administration
and let the wishes of the deceased be carried out.”
Trusts can have tax advantages. With a typical will, Lewis says, your heirs get what
you have decided to leave them, which may mean they will have to pay estate taxes.
Depending on how a trust is drafted, “The provisions of the trust can have estate tax
savings.”
And there are several different ways to draft a trust. “There are many different types of
trusts: revocable, irrevocable, tax-motivated, tax-neutral, testamentary or inter-vivos,”
Payne says. “There is also a living trust which is a special trust subcategory – it is
revocable, tax-neutral and operates both during and after the lifetime of its creator.”
Get advice. With so many different types of trusts available and much information out
there, it’s important to get the right advice. “While it is possible to set up a living trust
on your own, especially with all the help and information available on the Internet, it is
still best to consult a tax advisor or estate planning attorney,” Payne says.
Lewis echoes that advice, recommending a financial planner with an estate
background who can take a “big picture” look at your situation, being sure to take all
your wishes and needs into consideration. You will still need an attorney to draft the
legal document.
No matter what, be sure to do something. Whether you choose a will or trust, just be
sure to have something in place so the assets you have worked so hard to build during
your lifetime don’t become community property upon your death.
“The importance of having a will is that if you don’t have it, the state of Kentucky will
decide what happens to your assets and that may not be what you want,” says Lewis.
“It’s important to get a will, even a simple will. Also, with greater assets, it’s even more
important to have something, a will or trust, in place.”
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