Many people are confused over what is best for their estate planning. According to Beck & Lenox Estate Planning and Elder Law, some think they need to be rich before they need to do planning. Others think a Will is all they need. Others who have a Trust may ask, “Do I really need a trust?”. Kiplinger’s recent article, “Four Reasons You Don’t Need a (Revocable) Trust,” sets out some reasons to rethink a trust.
- Probate avoidance. You can typically attach beneficiaries to the majority of your assets. You can add a transfer-on-death (TOD) to your investment accounts. You can attach them to any taxable account, and the assets will “transfer” according to your wishes outside the court system. A similar concept exists for bank accounts in the form of payable-on-death (POD) designations. Retirement accounts, life insurance and annuity contracts all have beneficiaries attached.
- Simple wishes. If you want to get your assets to your beneficiaries in a direct manner, a trust is likely unnecessary. However, you will need a trust if you want control over how the assets are distributed beyond your death.
- Medicaid eligibility. This is where it’s important to differentiate revocable, or living trusts, from irrevocable trusts. The former is primarily used for control and efficiency while distributing your assets. The latter is typically used to reduce your taxable estate. Other tools can help to minimize taxes. However, a stand-alone revocable trust will do nothing to reduce your taxes, since it is tied to your Social Security number.
- Bad follow-through. Many people go through the hassle and cost of putting together a trust but never follow through and transfer their assets into the trust. That’s the only way it will work. If you plan to use a trust as part of your estate plan, you must transfer ownership of the assets into the trust for it to have any effect. For example, there must be a deed transfer for your home and a title change for your investment accounts. Creating the trust is an expensive waste of time without funding the trust.
Contact a reputable estate planning attorney to discuss your estate planning needs. If long-term care is a big worry, make sure that attorney has also been practicing elder law for years. Beck & Lenox can help you in both areas, and if you have a trust, their attorney can help you sort through the answer to, “Do I really need a trust?”. Click here to schedule a free phone consultation.
Reference: Kiplinger (Sep. 16, 2023) “Four Reasons You Don’t Need a (Revocable) Trust”