The question is basic to financial planning. Before you can answer, you need to know what you want to accomplish. For instance, say you want to avoid probate, a public court process that validates your will and administers your estate. One way to do this is to create a living trust. A living trust, also known as a grantor trust, can expedite or avoid probate while keeping your assets private.
However, establishing a formal trust is not always necessary if keeping your estate out of probate is your only goal. Depending on the procedure in your state and the assets you intend to pass to your heirs, you may be able to make your financial accounts “payable on death” to a specified beneficiary. You can do this by filling out the required forms at your bank.
For other objectives, suitable alternatives may not be presently available. Providing for a special needs child is an example. While you can name your child as beneficiary of your retirement account or life insurance policy, owning assets might interfere with other benefits for which your child is eligible. A special needs trust can prevent that outcome and protect assets you have set aside for your child’s future.
Trusts can also be used to reduce the size of your estate, provide a way to pay estate tax without liquidating assets, and transfer property to grandchildren. Give us and your attorney a call to discuss whether a trust can be of benefit to you.