What Is A Trust? What Benefits Does It Offer? Are There Any Limitations?
A trust is really a private document that tells the court they have no control over something. It’s created by a person, the settlor, to bypass probate court and avoid attacks from potential creditors. The trust is controlled by a person, often the settlor and now called the trustee, for the benefit of someone else. That’s really the essence of a trust: something held by someone for someone else. Trusts have a lot of benefits, but the bottom line is to avoid allowing the money you worked all your life to save to be depleted by courts, administrators, and anyone else who might try to take it.
Does Everyone Need To Have A Trust As Part Of Their Estate Planning Documents?
Absolutely, yes, though I am biased here because of my opinion that everyone needs to avoid probate and saves you money. Most people don’t know what the issue is that causes them to go through probate, so let’s look at probate for a minute. If you own a home that is titled in your name and you die, who is going to transfer title? Only the courts can transfer a title after a person’s death, so your family ends up in probate court. If you own a car and that car is titled only in your name, guess what? Same situation. If you own a bank account and you die, the banks will automatically shut your accounts down and then transfer them to the probate court for instructions.
It’s really important, therefore, to have a document in place that instructs the surviving people or the trustee on how to handle these matters. Banks, of course, will honor a trust if it’s properly placed in their system; the Department of Motor Vehicles will honor a trust, any transfer-at-death-type of certification. Having a trust saves a lot of trouble in going to these courts and wasting your time.
Also, think about the surviving people. They are grieving right now. You don’t want to burden people who are already sad with something that Mom or Dad didn’t do but should have. It’s really a benefit for everyone to have a trust. It may not ease their grief, but it preserves the hard-earned money that should be left for them without tying it up in probate court.
What Are The Different Types Of Trusts? Do I Need More Than One?
Let’s talk about the different types of trusts first. You can put almost anything into a trust, so there are many different types. The two types of trusts that cover the big category amount are revocable and irrevocable trusts. Revocable trusts can be created, changed, destroyed, saved, and terminated in your lifetime—you can do whatever you want with them. Irrevocable trusts, on the other hand, cannot have substantial changes made to their terms and conditions once they’ve been created. Of course, you can make minor changes, but if you have to make a major change to an irrevocable trust, you have to go to court to get that done.
There’s an example I always use when I illustrate how irrevocable trusts work for people. After being found innocent for murder, O.J. Simpson was sued for wrongful death and found liable. He had his monies in an irrevocable trust, and therefore, the judgement creditor could not attack that money. O.J. Simpson no longer had control over it, so they couldn’t get it. As you can see, irrevocable trusts offer a lot of protection to people, but they also restrict the settlor (in this case, O.J. Simpson) or anybody else from really controlling them.
As previously mentioned, you can create a trust for anything you can imagine. There are children trusts, sometimes called spendthrift trusts, for children who cannot yet manage money correctly. There are marriage trust that saves tax dollars often called A/B Trust, other tax savings trust called QTIP trust, named Qualified Terminal Interest Trusts. You can even create a trust for your pet. It’s really up to your imagination for how you want to handle setting out your affairs.
For more information on Benefits and Limitations of a Trust in MO, a free consultation is your next best step. Get the information and legal answers you are seeking by calling (314) 786-3536 today.
Call for a Free Consultation