Do I Need A Trust?

I lost two grandparents a few months ago. It's ok- they were both in their 90s. Each had lived long and fulfilling lives.

Watching my parents and in-laws work through the estate aftermath is giving me a first hand look at the process. While things are relatively clean in both situations, it can be cumbersome and highly emotional for others.

While it comes to organizing an individual's wealth after they pass away, creating a legal means as a framework for distribution can alleviate some of the complexity and headache. A trust is a legal tool designed to specify what, when, and how assets owned by an individual are distributed following their passing.

There is a significant projected shift in wealth between generations over the next 30 years.* Trillions of dollars will likely change hands from the older generation to the next. As with most things in life, planning things out in advance usually yields a better experience than flying blind.

This blog post focuses entirely on trusts- only one type of estate planning tool. Not everyone needs or wants a trust though. I'll cover other aspects of estate planning in future posts.

The following summary is designed to give readers a high level overview of the different types of trusts available. It's not meant to go into detail (that's for you and your attorney). What follows is a list of the more common trust designs and their intended uses. If you believe any of the following information to be relevant to you or someone close to you, it's important you seek out proper legal counsel.

Revocable Trust. The individual is looking to avoid probate or a strong desire for privacy.

Grantor Retained Annuity Trust (GRAT), a Spousal Lifetime Access Trust (SLAT), or a Dynasty Trust. The individual has substantial assets (combined net worth above the max estate tax exemption).

Special Needs Trusts, Revocable Trusts for Minors, and Generation Skipping Trusts. There are dependents with special needs, minor heirs, affluent children, or when an inheritance is expected.

Marital Trusts and Bypass Trusts. There are complex family dynamics, multiple beneficiaries, or a second marriage.

Irrevocable Life Insurance Trust. The individual has significant illiquid assets.

Charitable Remainder Annuity Trust (CRAT), Charitable Remainder Unitrust (CRUT), and Charitable Lead Unitrust (CLUT). The individual has a desire to donate or gift assets to family, friends, or causes.

If you feel any of the situations may apply, it's time you had a chat with an attorney specializing in estate planning.

Many estate planners offer a complimentary overview of services. Some will even go into a bit of detail regarding your specific situation or even offer to review your current legal documents before you cough up any dough. It's worth asking about this at the onset of initiating any relationship with an estate planner.

Ok Great, How Do I Find One? There are a few go-to sources to track down a specialist. Many employers offer a legal service where they've partnered with pre-selected attorneys at a pre-determined negotiated pricing. Alternatively, you can ask friends, family, your financial advisor, or simply perform a Google search for local estate planning attorney.

If you receive a recommendation, it's a little tough to go off someone else's "good experience". The simple fact is that they may not have actually executed any estate planning mechanics yet. Sometimes things that look good on paper don't exactly go as planned.

A financial advisor may be a better referral source if they've had clients (past or present) go through the estate settlement process. A financial advisor may also have a better idea of the expected cost of drafting legal documents. Pricing doesn't seem to be something estate planning firms seem to advertise much.

Final Message. If anything in this post caught your attention personally or perhaps applies to a loved one, don't wait. It's so easy to put this stuff off, but don't! If you do, you may be in for a host of unnecessary and unpleasant surprises a bit of forethought and action could have prevented.

If you live near my practice located outside Denver, CO I have a few sources I can point you towards for more info. Additionally, don't be afraid to reach out to me to help guide your decision making.

*Source: Investor of the Future, 2013

#estateplanning