Many clients and prospective clients say they need a trust. My first question is, why? What do you hope to accomplish with a trust? The answers often include, I want to avoid probate; I want to protect my assets; I want to provide for minor children; I want to protect myself in case I become incapacitated. The answers are many.
Clients often seem disappointed when I then ask, which of these is the most important to you? I’ll get a blank stare sometimes and they’ll respond, all of them. It’s then that I give them the bad news. Most of the time you can’t have it all. Let’s talk a little about why.
Asset protection seems to be a big deal with most people, especially when it comes to estate planning. People want to preserve what they’ve accumulated, and the possibility of losing it to creditors or if they have to go into a care facility is uncomfortable, to say the least. But here’s where the choices have to be made. The only way to completely protect your assets is to make sure you don’t have any to protect in the first place. That means getting rid of everything permanently. If asset protection is your main goal, you’ll need to create an irrevocable trust (meaning it can’t be changed) and you’ll have to give up control of your assets. If the trust is revocable or if you maintain too much control, the law will say you didn’t really give the assets away, so they aren’t protected.
The same is true if you want to avoid probate. They way to avoid probate is to own nothing when you die. With probate, it’s a little simpler than with asset protection because a revocable trust will work just fine. Still, you have to put everything into the trust before you die; otherwise it’s in your estate and might have to go through probate. Do you want the added hassle of dealing with all your property through a trust? Another choice that has to be made.
These are just two examples of why a single trust can’t address all your wishes. When planning your estate, you need to have priorities and objectives clearly in mind. Once your attorney knows what you really want to accomplish, she can properly advise you.
If you have estate planning questions, contact us.