Do You Need a Trust?

Estate planning can be a stressful process - especially if you aren’t clear on what documents you need in place to protect your loved ones.

Many people know the basics - 

  1. You need to update your beneficiaries on retirement accounts, life insurance, and enact a Transfer on Death for your bank accounts.
  2. Having a clear will that indicates how your other assets should be distributed can help streamline the process. 
  3. Create a Durable Power of Attorney and Healthcare Power of Attorney to allow someone specific to make decisions for you if you’re unable to do so.

However, one question that commonly comes up is - Do I need a trust?  This blog provides an overview of a potentially complex process.  Be sure to engage a professional to help you decide if a Trust is right for you.

Trusts are a unique estate planning tool that can be used to help your loved ones bypass the probate process and make the distribution of your estate much easier. Let’s look at what they are, when they’re used, and if you need one.  

What is a Trust?

Most people use a tool called a revocable living trust. A revocable living trust is a document that outlines how you want your estate to be administered after you pass away. They can cover all assets you own, from real estate to investments. You write a revocable living trust when you’re still alive, and you can choose any assets you want to be placed in that trust. You can adjust the trust at any time when you’re alive. 

When is a Trust Used?

A revocable living trust can be used by anyone - not just the rich and famous! In fact, a revocable living trust may help your family sidestep probate. Probate is a process where any assets owned by someone who has passed away are administered to beneficiaries by the court. Any type of account with a direct beneficiary listed bypass this process (think: life insurance and retirement accounts), as would any property that’s co-owned (like a home). However, any other assets are probate-eligible. These could be family heirlooms, high-value assets, vehicles that are owned outright, sole-ownership property, etc. 

Probate can be a lengthy, challenging process - which is why so many people look for options to help their loved ones avoid it in the event of their passing. The last thing your spouse or children need is to navigate the legal system while grieving and possibly trying to organize their own finances in the wake of your death. 

Do I Need a Trust?

Many people believe that a trust isn’t necessary if they indicate who gets which assets in their will. Unfortunately, a will can be contested after you pass away. Even if you think that your family would never argue over your will, a trust can help to ensure that no legal battles happen (which can help grieving and angry family members process their emotions in a healthy way, without arguing over your belongings).

For this reason alone, everyone who has assets outside of their life insurance and retirement accounts can benefit from a revocable living trust. 

Working with a Professional

Working with an estate planning attorney and a fee-only financial planner can help you to set up your trust and clarify what assets you will be distributing. Need more information? Reach out! We’d love to speak with you.

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs, and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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