Do I Need A Trust?

Do I need a trust?  Good question.  Chances are you don’t.

Trusts have many purposes, but your average person probably doesn’t need one.  But you may ask, why do so many people have them and why do lawyers try to sell them?  Lawyers like them because they can charge lots of money to create them.

Well, why do people have them then?  There are a couple of reasons for a trust:

1.       Privacy.  When a person dies with a will, the will must be submitted to the Surrogate’s Court, in the process known as Probate.  The court reviews the will and makes sure all the necessary people are notified. Then the will becomes a public document and anyone can go to the court and request to see the file.  With a trust, no strangers get to see the trust.

2.       Speed.  Probate can take some time, several months.  With a trust, the property can be distributed immediately.

3.       Cost.  Probate in New York has filing fees and other costs like Attorney Fees, Accountants, and so on.  The filing fee is set by law, the highest filing fee, $1,250 for estates over $500,000.00. Unless you state otherwise, your executor is entitled to a fee, so is the attorney handling the proceeding.  With a trust, the fees are generally paid when the trust is created, mostly to the lawyer that drew up the trust.  Upon death, there is no probate proceeding so no filing fee and little or no attorney fees.  You’ll probably still need an accountant for taxes.

4.       Flexibility.  A revocable trust can be changed easily compared to a will.  You just make up an amendment and sign it.  For a will you need a codicil that is executed with the same formality as the will itself.

Sounds great right?  So why wouldn’t I want a trust?

1.       Cost, the cost of a will versus a trust really aren’t that different.  Creating the trust and transferring all your property to it can be expensive.  You will still need to have a will as a safety net in case there is property not in the trust or if there is a problem with the trust.

2.       Hassle. When you create a revocable trust, you need to then transfer ALL your property into the name of the trust.  That means your house will not be in your name, but in the name of the trust. Same for all your investments, bank accounts, cars, etc.  If you have property that is still in your name when you die (and it doesn’t have a beneficiary), guess what you need to do?  That’s right, Probate your will.

3.       It doesn’t reduce your taxes or protect your assets from Medicaid.  For a trust to provide protection from taxes and Medicaid, it must be an irrevocable trust.  That means you can’t change it later and you can’t have control of it while you are alive.  For Medicaid, it must have been in existence for five years before it protects assets.  With the increase in the federal lifetime exemption and portability, the need for tax shelter trusts doesn’t apply to most people.

In our opinion, you don’t need a trust unless you fall into some special circumstances.  Have a question about it?  Give us a call or send a message.

Hubert Plummer