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When Should I Start to Consider a Trust?

Someone asked me recently when they should start to consider a trust, even though they already have a will. It is an interesting question with no real clear rule saying, “this is when you should create a trust instead of a will.” A trust will provide certain advantages but may not be necessary in every case.

Some factors which may influence your decision include; probate, the size of your estate, and your age. But perhaps the most significant thing to consider is; wills are easier and less costly to create whereas a trust requires a fair amount of work and are more expensive.

Let's take a deeper look at some of those factors.


1. Probate

The big reason to create a trust, as opposed to a will, is probate. This is something I have written about before and it remains true. Wills are subject to probate. Trusts are not. There are a couple of reasons a person may wish to avoid probate but the big one is, probate can take a long time and cost a lot of money.

In many cases, it is worth putting in a little bit of extra time and money now to avoid probate in the future.

And yet, probate is becoming more efficient and easier to avoid. In fact, in many states the probate process has been streamlined, thus lowering the time commitment and cost.

In addition, there are a lot of simple ways to avoid probate for specific assets, for example, an account with a beneficiary designation (i.e. a retirement account or life insurance plan) will not be subject to probate.

Avoiding probate is a worthy goal, but creating a trust may not be necessary to accomplish this goal. An attorney will be able to help you establish the best strategy for your assets to ensure your family is not stuck in a lengthy probate process.

2. Size of the Estate

Put simply, the more wealthy you are, the most important creating a trust is. It should come as no surprise that the bigger the estate, the more complex the probate process will be. There is simply more to do.

Of course if you are extremely wealthy, you will also need to prepare for the estate tax which kicks in for an estate larger than 11.5 million (per individual). Trusts and other estate planning strategies will be crucial at that point. But for most of us, that will not apply.

Avoiding probate through a trust becomes more important as your wealth grows.

3. Age

If you are younger, avoiding probate may be a lesser concern; your risk of death is lower and your estate may be smaller. But as you age, often your estate will grow, as does the risk of death.

A middle-aged person may not need a trust, and there will likely be plenty of time in the future to implement a trust, if necessary. It is important to have a will at all times, but a trust is something you may feel comfortable putting off until you feel like you need one.

Again, the size of your estate is likely to impact that decision.

Wills are Easier and Cheaper, Trusts require more Attention and Cost

When it comes down to it, the big decision is; is a trust worth the extra time and money now, to avoid probate in the future? The above factors will help you to make that decision, as will talking with an attorney.

To make your decision consider your age, the size of your estate, and how important it is to you to avoid probate. Talk with an attorney about your decision and ask about ways to avoid probate without creating a trust.

If you would like help determining what strategy will get the most out of your estate for your beneficiaries, please contact Hometown Law.

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