Two Main Benefits of Trusts

Using trusts in estate planning is valuable in two main ways. First, assets titled in the name of a trust do not go through probate when the person who created the trust passes. Second, assets left to loved ones in trust can be protected from taxes, probate, loved one’s own indiscretions, loss to in-laws in a divorce, loss to loved one’s creditors and you can guarantee that your grandkids will get what may be left over instead of your in law. Meanwhile, assets left in trust for a loved one can be structured so the loved one is in control of the property, so they can use it, but they cannot lose it if they get sued or divorced.

FOR EXAMPLE: Let’s say Mabel and Frank have been married forty years and they have two children named Sam and Maxine. Sam is married to Leslie and Sam is reckless with money. Sam has two children: Fred and Fritz. Maxine is married to Jack and she is very frugal. Maxine has one son named Alex. Mabel and Frank own a timeshare in Florida. Their net worth is about 1,500,000 (counting $200,000 life insurance that will pay off on Frank’s death).

Mabel and Frank want to avoid the cost and delay of probate. They also want to make sure they or their children will not have to hire a lawyer in Florida upon either of their passing. What should they do? They should each have a revocable living trust that owns their probate property. This will avoid probate in South Carolina and Florida. Now, the exact titling and beneficiary designations on their assets should be determined with the advice of their estate attorney.

Mabel and Frank also want to make sure that Sam will not squander the money, but they want him to benefit. They want to make sure Maxine’s share will eventually go to Alex and not Sam. What should they do? They should direct that Sam’s share goes into a trust that is tailored so Sam can’t squander the money. They should direct Maxine’s share in a trust that directs the remainder interest to Alex.

probate will be avoided in Florida and South Carolina.
Second, Sam will not be able to waste the money. It will last.
Third, Sam (Maxine’s husband) will never get that money. Alex will get what is left over.
It is amazing what I good solid simple estate plan can do. And so the moral of the story is that a little planning can make a big difference.

Contributed by: Mark F. Winn, J.D., Master of Laws, LL.M. in Estate Planning, is a local tax, asset protection and estate planning attorney.