People call and say “I Need a Trust.” It’s often during our first conversation, and quite often, it’s not true. They’ve heard from friends that it’s necessary in order to avoid probate. It may be necessary for that purpose and isn’t always the case.
In Florida, Trusts can help avoid probate which can be a draining process – emotionally and financially. And can be avoided in more ways that creating a Trust.
My experience is that families with adult children and adult grandchildren have simpler methods to distribute their assets as they like – mainly through beneficiary designations and Lady Bird deeds (enhanced life estate deeds).
Assets named with primary and secondary (contingent) beneficiary designations are generally sufficient. Beneficiary designations supersede anything that may be in a Last Will and Testament and are not available to estate creditors. Lady Bird deeds (enhanced life estate deeds) are instruments that pass real property outside the probate process while owners maintain all their rights until such time as they pass.
An example is a client who called with the statement about needing a trust. After compiling a list of her assets including real property, they realized that beneficiary designations and the Lady Bird Deed would suffice. Their income was a pension and social security which both will end when she passes. They had small bank accounts and an IRA for which they had already named a beneficiary. By going to their bank and naming primary and contingent beneficiaries and naming contingent beneficiaries for her IRA, the estate was covered.
I do recommend trusts in these situations among others:
- when families have minor children, sometimes even minor grandchildren;
- when there is a child or adult with special needs already receiving government benefits or who may need government benefits at a later time
- when the client doesn’t want some/all of their beneficiaries to inherit substantial assets (as defined by the client) until a specific age or spread out over time.
Sometimes I recommend a trust where a client has no children and their beneficiaries are siblings who are older and the chance of a sibling predeceasing the client is not unrealistic. I often recommend a Trust for this client to preclude the need to do anything if one of the siblings predecease. The Trust would outline that the now deceased sibling’s share goe to their children and would keep the estate out of probate.
For married couples, trusts can offer tax planning advantages and help manage assets if one spouse becomes incapacitated. And for snowbirds or those who own property in multiple states, a trust can eliminate the need for multiple probates.
Does everyone need a trust? No. For some, a well-crafted will, powers of attorney, and advance directives are enough.
The best way to know? Sit down with an experienced, compassionate attorney (bonus points if they have a sense of humor) and explore your options.