The Truth About Trusts By Jamie Dietz For many years, living trusts have been an invaluable estate planning tool for clients to accomplish a variety of goals. One primary goal often accomplished was probate avoidance. Assets titled in trust pass directly to the beneficiaries and therefore avoid probate. Frequently however, individuals fail to fund their trusts which results in their assets transferring through the probate process. Probate avoidance can easily be accomplished by other means, such as joint ownership with rights of survivorship, and assets titled with “payable on death” or “transfer on death” designations. Today, real estate, bank accounts and automobiles can be titled with these ownership structures. Trusts have also been a great tool to minimize estate taxes. Although, with the changes in the federal estate tax exemption equivalent, most individuals will not benefit with the type of tax planning that trusts previously provided. Also, a common misconception is that assets titled in trust will avoid estate tax. All assets owned by an individual at death are subject to estate tax regardless of title, but certain permissible deductions can minimize the tax consequences. Essentially, the appeal of trusts to accomplish estate planning goals has diminished. However, trusts certainly do afford some great benefits which otherwise may not be achieved with other estate planning techniques. These benefits may include delaying distributions to beneficiaries, providing for special needs children, potential savings on estate tax, protecting beneficiaries from creditors and managing assets for the elderly while living. It is extremely important to fully understand the benefits of trusts as well as the alternatives to trust planning. Too often, trusts are utilized needlessly, which in turn can create more work and unnecessary expense. Clients must first determine their objectives relative to their assets and intended distributions to beneficiaries. Then, clients should consult with their professional advisors to determine whether a trust is truly necessary or beneficial to achieve their estate planning goals.
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