Should I rethink trusts? Trusts have long been a cornerstone of estate planning, offering a means to protect and distribute assets efficiently. But in today's evolving legal landscape and shifting financial realities, the question arises: should you rethink trust? At Vick Law, P.C., we understand the complexities of estate planning and the importance of staying current with changing laws and regulations. In this article, we'll explore the factors that might lead you to reconsider the role of trusts in your estate plan, offering insights and guidance to ensure your financial future remains secure.
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.
Trusts are a valuable tool, but whether they still align with your goals is a question only you can answer. At Vick Law, P.C., we're here to assist you in evaluating your estate plan and making the necessary adjustments to ensure it continues to protect your assets and secure your legacy. Your well-being is our top priority, and we work closely with you to tailor a strategy that fits with your unique circumstances. Contact us today, and let's secure your financial future with a plan that meets your evolving needs
Reference: Kiplinger (Sep. 16, 2023) “Four Reasons You Don’t Need a (Revocable) Trust”