TRUSTS: PROTECTION FOR EVERYONE, NOT JUST THE RICH
TRUSTS: PROTECTION FOR EVERYONE
Once upon a time, trusts were mostly tools used only be the extremely wealthy to protect their assets and transfer property. Trusts have changed and the law has changed, and in 2018, trusts are underutilized. Trusts make sense for a lot of people, not just the rich. Divis Law would like to help you understand what a trust is and how a trust can help you to protect yourself, your family, and your assets.
WHAT IS A TRUST?
A trust is a legal tool that splits the title of some type of property. The property can consist of anything: real estate, personal property, cars, trucks, boats, jewelry, cash, proceeds of life insurance policies, stocks, bonds – just about anything. The split in title means that the settlor (the person creating the trust) usually retains equitable title while a trustee – which is often a bank or other financial institution – acquires legal title to that property. The trust is set up with a beneficiary, who is the person or group of people the trust is to benefit. The trustee uses the property in the trust according to the terms of the trust to benefit the beneficiaries. The Settlor and Beneficiary can be the same person. Trusts can be created while the settlor is alive – this is called a living trust – or after the settlor has died, which is generally called a testamentary trust.
I HAVE A WILL, SO I DON’T NEED A TRUST, RIGHT?
Wrong! Wills have a few problems. First, a will doesn’t start to operate until the person who made it is dead. That’s why wills need to be submitted to the Probate Court before they can operate. The purpose is to prove – or “probate” – the will. Since the person who wrote it can’t testify, this can create problems. The will might be lost; it might be destroyed; it might be challenged. Wills are also public documents. Once a will is submitted to probate it’s generally accessible to the entire world.
Trusts, on the other hand, are private transfers. They are made while the Settlor is alive and many times they become operative while the Settlor is alive. Challenging, losing, or destroying a trust document is very hard because of this – it’s already operating at your bank or financial institution. It doesn’t need to be brought forth from the bowels of a descendant’s file cabinet and offered to Probate. Property that is in a trust does not need to be transferred through Probate at all, because legal title passed from the settlor while the settlor was still alive; this makes settling an estate generally faster, easier, and more private. The trust beneficiary changes when the settlor dies; instead of the beneficiary being the settlor, the beneficiary changes to whoever the trust names. This happens privately and generally outside of the reach of the courts or the prying eyes of the public.
I DON’T HAVE A LOT OF ASSETS. WHY DO I NEED A TRUST?
One very good reason to have a trust is having children. If both parents die or are incapacitated and the children are not old enough to inherit property, they cannot inherit through a Will. There may also be problems deciding what to do with any life insurance payout, or your house, or your cars. One way to prevent this problem is to create a family trust. The trust is funded by you assets, and augmented by life insurance proceeds, retirement accounts, and anything else you don’t think the guardians of your kids will need. Instead you leave a pile of cash in a trust which can only be doled out according to YOUR trust terms to help care for your kids after you are gone. If you don’t have a trust, you cede most of that control to someone else. Your assets may help your kids, and they may help someone else, and you’re not alive at that point to do something about it.
Trusts are extremely flexible tools that can be used for a wide range of things. They can help insulate your assets from the ups-and-downs of life. They can help you maintain privacy. They can ensure that whoever cares for your children if you die will have the resources to do it the way you want them to. Trusts are not just for the rich; they just make sense. Divis Law will always take the time to explain to clients what the firm is doing and why. Call Divis Law today for a free consultation about how a trust can help you.