Should I set up a trust?

Should I set up a trust? What should I consider?

I’m attorney Sarah Siedentopf, I do estate planning and probate in Atlanta, Georgia. And what things should you consider when you are deciding whether you want to set up a trust?

So the first thing we’re just going to go ahead and get right out there is, trusts take more work on the front end and are a little more expensive on the front end. And so part of that work is going to be done at your attorney’s office. Thus, the more expensive, the longer document we’ve got more contingencies in there, all of that stuff, but also there’s going to be some paperwork, you’re going to have to change account information. You’re going to perhaps do a deed, transferring your house into the trust. Think about all of those things.

So there will be some extra work on the front end, that you just need to be aware of, but it’s worth it. So one of the big reasons that you would want a trust is probate avoidance. If you don’t have one, and you pass away, your assets are going through probate, and it is at least six months, more realistically, a year or longer. And it’s a court process for officially transferring ownership of your assets. So anything in the trust, avoids probate and thus avoids the costs of probate.

So I would say that as far as costs go, I generally think that you’re actually getting a better deal with doing the trust upfront and avoiding the later costs. But another thing that would be a reason to have a trust would be a blended family, because you think about wills, that can be changed. And we say, you know what? If I leave my assets to my spouse and I pass away first, and then my children are jerks to my spouse, what happens if my spouse changes their mind and changes their will and cuts my children out? Obviously I wanted my spouse to get the assets first, but I was planning for those to go to my kids afterwards. So that’s something that you want to keep in mind.

Another thing to consider with trusts, is if you’ve got someone in your life who has special needs and is trying to qualify for means-tested government benefits, if you give money to them outright, that is going to disqualify them and be quite harmful, really. So you can have a specific type of trust, so that they can have some very careful access to the money for very certain things and not disqualify themselves for means-tested government benefits.

Another pro for a trust is that you can set up a trustee and if your beneficiaries have creditor problems and this also sort of flip side, for if they have money management problems, your trustee can handle that, in the sense that your trustee can say, no, I’m not giving you money for this terrible idea. But on the creditor side, if someone other than the beneficiary is in charge and can say, no, I refuse to pay for this and doesn’t have an obligation under the terms of the trust to pay for whatever it is that the beneficiary wants. Then, if the beneficiary has a creditor who is trying to collect, they are not going to be able to collect from the trust. And so that money will be able to stay in the trust.

Often we can say, you know, the trustee can decide not to make any distributions and that keeps things safe. So there are a lot of good reasons that you might consider a trust, on the flip side, wills are easy, and they cover everything that you own naturally. You don’t have to add things into your will. Obviously, you want to address them in your will. You want to say, who gets what and how you want things handled, but you don’t have to do anything to transfer them into the jurisdiction of the will. It’s naturally whatever you own, is handled by that will, and there tend to be shorter documents, and simpler documents, and possibly, you know, shorter administration period, if we say that, you know, this year or 18 months of administration of, you know, getting everything sorted and handed out, versus if we’re holding something in trust for a beneficiary for an extended period of time, you know, maybe even years. So the trust could in fact be longer, even though it doesn’t have to go through probate.

So there are pros and cons. You may have noticed that I have a slight bias towards trusts because probate is very difficult right now, courts are very backed up, and just, you know, things are generally difficult in that area. And so I love to hear that somebody has a trust and that’s not going to be a problem for their family, but there are definitely times that a will is the correct answer. So I would love to talk to you about that, if you’ve got questions about which one is correct for you, and of course, please feel free to comment, thanks.