In our last column, we talked about the value of a trust and discussed in some detail how a trust can help a family avoid the costs of probate, which can be especially helpful when a person, a couple or a family owns property in two or more different states.
We also mentioned several other advantages of a trust to include things like increased privacy, asset protection from creditors of beneficiaries, control over the use of assets after incapacitation or death, reduction of estate taxes and the ability to appoint a trustee to manage affairs of the deceased person beyond the implementation of his or her last will and testament.
We will address these additional benefits of a trust in no-cost seminars twice each month so that anyone who wishes can find out more about trusts and how they can be used to help in specific situations.
But to help you with a broader understanding of why a trust can help, we'll focus on one of the more important and popular reasons for establishing a trust, namely the ability to control assets into the future.
When your last will and testament is probated, everything is distributed at that point (assuming that nothing is to go to a minor or incapacitated person) and there is no means to spread out the inheritance over time.
That may not be problem if the beneficiary is financially responsible and the amount is not all that significant.
But in the event that the beneficiary is really not capable of handling the inheritance, it will do more harm than good in many settings.
For instance, we know of a situation in which a 30-year-old child of deceased parents received $300,000 and an interest in the parents' personal residence; as soon as the money was made available to him, he quit his job.
And unbeknownst to the parents, he had a hidden problem with alcohol. We need not detail how quickly his life went downhill from there; you already know the answer.
But, of course, the sad irony of the situation was that his parents worked very hard their entire lives to be able to leave something behind for him and his other two siblings. What they thought would enhance his life actually helped him destroy his life, at least so far. We all hope he will find his way back.
Had the parents put the money in trust and appointed a trustee to oversee a slower, more helpful distribution of the parents' generous gift, his life would likely have been much different.
For instance, a trust that spread out his inheritance over five or 10 years, with the ability to pay the son's creditors directly, would likely have led to a much different lifestyle for the son and outcome for the parents.
While it is true that the benefits of a trust increase as the estate size increases, trusts are not only for the wealthy, however you define that word.
But, all too often, people dismiss the option of a trust because they perceive the costs of setting it up and maintaining it will be too high.
In reality, most people spend more on their utility bill in a year than they will spend setting up a trust that will govern the next 30 to 50 years of their lives and then their estate, and will dictate so much of how their legacy will impact their children.
As we mentioned, we discuss these, and other, estate planning matters in our no-cost seminars. There will be limited seating for each one (no more than eight people), so that we can focus on the specific questions of a small group.
If you are interested in attending the seminar, or if you have any questions about this article or topics you would like us to address in future columns, send an e-mail to bwright@GJlawyer.com or call (970) 270-1213.
Brad Wright's business and estate planning practice includes transactional and litigation matters with a special focus on business succession.
His brother, Steve Wright, has a similar law practice in Idaho Falls, Idaho and, together, they assist businesses of all sizes and types with a wide variety of legal issues.