Do I Need a Trust?
North Dallas LIVING WELL Magazine
I had a meeting with Bill, a potential client, last week. He told me his neighbors told him he needed a Trust because their attorney had recently prepared one for them.
I have heard this story many times with potential clients and as much as I would love to create a Trust for them and gladly take their money, I explain to them it is not always necessary and they can keep their money for something else. You can pick your chin up from off the floor. Yes, I am an attorney who just told you something that would make me money may not be necessary and to keep your money.
Trusts can be created to take affect only upon death, or they can be created and take effect while you are living. A Trust is a nonprobate asset and disposes of those specific assets placed in the Trust.
5 Reasons You Need a Trust:
1. Privacy. When someone dies and you go through the court process, you must file their Last Will and Testament with the county clerk’s office. This Will is public record, meaning anyone can go to the clerk’s office and make a copy of the Will. Furthermore, it may be necessary to file a document called an Inventory, Appraisement and List of Claims, that literally lists every asset that individual owned. In order to protect your privacy, you can place your assets in a Trust while you are alive. You maintain full use of the assets in the Trust but the Trust remains completely private.
2. Perfect asset protection for your children. Believe it or not, by setting up the proper Trust you can make sure 100% of your assets will always be available for your children and will not go to a creditor or ex-spouse. For example, if your child is being sued or they are getting divorced, no creditor or ex-spouse would be able to get to any of the assets in the Trust, as long as it was set up properly.
3. Spendthrift. What does this even mean? If you have a spouse, or child that loves to spend money they are considered a spendthrift. There is a Trust that can be created where you appoint a Trustee who has the authority to make distributions to your spouse or child. All of the assets of the Trust are used for their benefit but your spouse or child cannot access the assets on their own.
4. Special Needs planning for a loved one. A Special Needs Trust is the most effective way to protect your child with a disability. This is a very specialized Trust that can manage the assets you have set aside for your child with a disability while also maintaining that child’s eligibility for public assistance benefits.
5. Out of State Property. If you have any real estate that is not located in the State of Texas, you need to consider creating a Trust to hold the property. This Trust would be created during your lifetime and is called a Revocable Living Trust (RLT). The primary purpose of this RLT is to eliminate the need to go through the probate process in each state you have property.
Remember to always consult with a qualified estate planning attorney to determine if a Trust is right for you. The best advice I can give you is to be educated as you meet with estate planning attorneys. Although there are many reasons to create a Trust, those discussed above are the most common reasons why one may be necessary or recommended.
Beware of Reverse Mortgages
For many home owners 62 years of age and older, the reverse mortgage may be considered their knight in shining armor. While that may be true, given their economic situation, they need to be aware of the pitfalls of a reverse mortgage. In many instances, a parent thinks they are leaving their biggest asset, being their house, to their loved ones. It is not until they die that their children realize the house is lost because of a reverse mortgage. Before making any decisions, please educate yourself regarding the pros and cons of a reverse mortgage as it relates to your particular circumstance.
