Question: So many people say they have a Living Trust, but we’re not sure if we need one. How do we know if a Living Trust is necessary for us?
Answer: People use Living Trusts for various reasons. Some or all of these reasons may be important to you:
- So children/family can avoid probate court when the parents become mentally incapacitated (via accident or old age), or when they die.
- To preserve capital-gains tax benefits for assets that pass to children at death – benefits are lost when assets are gifted during parents’ lifetime.
- When a parent dies, a Living Trust can protect the assets from passing to husband’s new wife or to wife’s new husband.
- To protect the assets from children’s divorces, lawsuits, bankruptcies, creditors, etc..
- To ensure that the children’s inheritance will stay “in the family” and not pass to the child’s next spouse and that spouse’s children.
- To enable a disabled child or grandchild to qualify for “need-based” government benefits if he becomes disabled. [Requires inclusion of “Special Needs” planning].
- Incentives for children or grandchildren so that they can better themselves while also inheriting from you.
- Protect heirs from becoming financially dependent upon their inheritance.
- To holdback inheritance from heirs who have a spendthrift lifestyle or a drug, alcohol or gambling addiction.
- To make sure if you unexpectedly die or become incapacitated, that your pets are properly cared for by caring people and that money has been set aside for that purpose.
You may benefit from a Living Trust for the foregoing reasons – and if you want to make sure your assets pass (when you are deceased) to the right people, at the right time, and in a productive, meaningful way. Without that type of legal planning, you have no control over what will happen.
The MYTH is that your assets need to exceed a million dollars or some other arbitrary number before you’ll qualify for or benefit from a Living Trust.