Clients often come to me thinking it’s critical for them to set up a trust in order to “avoid probate,” but you generally don’t need a trust to transfer your wealth to surviving spouses or children unless you’re ultra-wealthy.
A last will and testament is usually sufficient. However, there are some good reasons for people to create a living trust, even if they’re of ordinary means.
Here are five of them:
1. You own property in another state
To transfer legal title for a house or other real property after your death, your executor will need to sign a deed conveying the property to your heirs. If you own land in another state, your executor will have to retain a second lawyer to open another probate proceeding in that state.
However, if you put the land in a living trust, your successor trustee can convey the property to your heirs without a second probate proceeding.
2. All your adult kids live out of state
Most people appoint an adult child to be the executor of their will. If your adult children live out of state, however, making them your executor can be a burden, requiring them to make multiple trips to Alabama to initiate and manage the probate process.
If you know that none of your children will be Alabama residents when you die, you can place your assets in a living trust. Your successor trustee can then manage the disposition of your assets without opening a probate proceeding.
3. You’re concerned about dementia and being vulnerable to fraud
For many aging parents, their home is their primary asset. They worked hard to pay it off and maintain it and want to leave it to their children. But they face the risk of dementia, which can make them vulnerable to fraud. Creating a living trust minimizes the likelihood that your aging parent will get scammed.
The parents can place their home in a living trust and appoint an adult child as trustee. This will make it harder for the parent to, for example, take out a home equity line and wire the money to fraudsters. As trustee, the adult child is able to protect the parent’s assets.
4. Family Matters
Families face all sorts of disagreements about how a parent’s assets should be distributed. For example, adult children might challenge a parent’s desire to leave significant assets to third parties. If you place your assets in a trust and appoint a third party as successor trustee, those assets can flow to your desired beneficiary or be distributed in the manner you prefer after your death, minimizing the likelihood of a successful challenge to the gift.
5. Cash management for end-of-life care
Many older people – particularly those without children – want a trusted person to manage their cash towards the end of their lives. If you create a trust, your appointed trustee will have a legal, fiduciary obligation to manage that money for your benefit.
Depending on the size of the asset, you can even appoint a trust company to be an independent, impartial steward of those assets. After you die, your trustee will distribute those assets to your desired beneficiaries.
No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.
