When it comes to estate planning, most people choose to make a will so they can specify who should gain possession of their assets upon their death. However, a will is not the only way to transfer property. Trusts are also an option.
Trusts are legal structures that allow assets to avoid the routine process of probate that wills must go through when a person dies. This means it’s quicker and easier to pass on assets to one’s beneficiaries. With that in mind, why aren’t trusts as popular as wills? Mainly because there are a few disadvantages to setting up a trust.
How Does a Trust Work?
When a person sets up a trust with the help of their legal counsel, they become the “grantor.” They name beneficiaries who will gain the benefits of the assets in the trust when the time comes for them to be transferred. A trustee is also named to oversee the trust and the distribution of the assets.
The trust will be set up as either revocable or irrevocable, which means that the grantor must choose whether they want to have the power to change the trust later and still have access to the assets or not. Irrevocable trusts provide more protection for assets but offer no flexibility to the grantor.
Trusts offer people more control over how their assets are used if they should die or become incapacitated. They can specify how and when the money or assets can be used and who should benefit.
What Are the Problems with a Trust?
Trusts sound like a great choice for estate planning, but they come with some disadvantages. One major disadvantage is that they can be complicated and expensive to set up. Although the idea of avoiding probate costs is attractive, it’s important to realize that trusts come with their own costs, including legal fees and compensation for the trustee, if needed.
Setting up a trust also doesn’t mean you can skip having a will. Only specific assets are contained within a trust, and anything you want to include later must be added manually. This means that you’ll need a “pour-over” will to cover anything not included in the trust. This will must still go through the probate process.
Who Should Consider a Trust?
Most people don’t have enough assets to worry about setting up a trust. However, if you have a lot of assets to pass on or your family dynamics are complicated, then a trust might be a good option. A revocable trust can also be used to help provide some financial control and insurance for yourself should you become incapacitated.
To find out more about the pros and cons of trusts for your situation, you should seek help from an experienced estate planning lawyer. Call our Worcester, MA office at 508-571-5452 to get advice on wills, trusts, and more.