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Reasons to Create a Trust

Minor Children

Children under the age of 18 cannot own financial assets. If a minor child is named as beneficiary, the money will be held in a custodial account until they reach the age of majority when they will have full access to it.

This is problematic because:

  • The court appoints a custodian
  • This takes time and money
  • This custodian may not have financial savvy and/or the best interests of the child at heart
  • Without the skills to manage it, inheriting money can create more problems than it solves for many young adults

Trusts created under your will typically provide for minor children.

Blended Families require specialized estate planning. Keeping the peace, protecting feelings, accommodating needs and achieving "fairness” will likely be difficult.

Qualified Terminable Interest Property Trusts (QTIP) are commonly used to provide for a surviving spouse and ensure a legacy to children from prior relationships. Life insurance may be used to create a legacy for the children of the spouse who has less financial assets.

Adult Dependents with Special Needs

Special Needs Trusts ensure a loved one receiving government benefits due to a disability is not disqualified from receiving those benefits because they inherit a legacy from you.

When one's spouse is a non-U.S. Citizen 

Foreign spouses do not benefit from the unlimited marital deduction upon the death of their American spouse.

Consider using a Qualified Domestic Trust (QDOT) or citizenship.

To care for a beloved pet

Similar to a child, your Will can create a Trust to provide for your companions.

Ensure your wishes are followed after death

In cases where it is appropriate to encourage certain behavior, control the timing of distributions, etc.

  • Require the beneficiary to reach a certain age(s) before receiving distributions
  • Prevent spouses from benefiting from the inheritance in the event of divorce
  • Require proceeds to be used for education
  • Require a trust beneficiary with known struggles with drugs to test clean before receiving a distribution
  • Other needs

Avoid Probate

Revocable (Living) Trusts are helpful in simplifying the estate settlement process; particularly if your state’s probate process is expensive, difficult to navigate or you own property in multiple states.

Minimize Estate Taxes

Federal Estate Taxes are a concern for anyone with an estate valued at $5m ($10m for married couples). State estate taxes may kick in at much lower levels.

Common trusts that seek to minimize estate taxes include:

  • Generation-Skipping Trusts (GST) allow you to transfer assets to directly to grandchildren or great nieces and nephews. Leaving the assets first to their parents—who would then pass them on—may result in those assets being taxed again.
  • Charitable Trusts simultaneously remove assets from your estate and fulfill charitable intentions.

Liability Protection

Irrevocable Living Trusts are used to protect assets that might otherwise be vulnerable to creditors in event of bankruptcy or lawsuits—including divorce.

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