Our Northeast Ohio Estate Planning Lawyer Shares the Benefits of Creating a Trust
While the mere mention of trusts may evoke images of dynastic wealth, their utility extends far beyond the realm of the ultra-rich. From protecting assets and minimizing tax liabilities to facilitating efficient wealth transfer and providing for dependents, trusts are indispensable tools for individuals and families of all backgrounds. Please reach out to our Northeast Ohio estate planning lawyer to learn more about creating a trust as part of your estate plan.
Trusts Can Be Used to Avoid Probate
The most common type of trust that individuals create is a Revocable Living Trust. As the name implies, this is a trust document that can be revoked until the creator passes away.
By creating a trust and having the trust properly funded, then upon your passing, your assets will avoid the local probate court. By avoiding probate, you will maintain your privacy along with having a much more efficient and quicker transfer of your assets to your beneficiaries. Often, an asset can be transferred to the beneficiaries of a trust within a few weeks as opposed to months under probate.
Trusts Can Be Used for Asset Protection
A trust can also be created to protect your assets from not only your creditors but also from potential or actual creditors of a beneficiary. In the State of Ohio, a person can create a Domestic Asset Protection Trust (DAPT)[1] A DAPT trust, if properly drafted and properly funded, will protect your assets from future creditors who may try to go after your assets. A DAPT trust can also provide protection to your beneficiaries in the event that a creditor is chasing after them.
Trusts Can Help You Manage Real Estate Holdings
If you own real estate in another State, then an ‘ancillary' probate administration would have to be opened up in the second state. For example, if a person is a residence of Ohio but has a vacation home in Florida. Then, upon the person's passing, their estate would have to open a Probate Administration in Ohio and a second Probate Administration in Florida. This will then take more time and money in attorney fees to transfer the real estate to the designated beneficiaries. If the person has a trust and has titled not only their Ohio real estate but also their Florida real estate in the trust, then the Florida probate is avoided.
Trusts Can Be Used to Provide for Family Members With Special Needs
If you have a child or grandchild who has special needs, then you may want to create a trust for the benefit of your loved one. If an individual is on some type of government assistance such as Medicaid or Supplemental Social Security, then there are statutory limits on how much that person can own in assets. If the special needs person were to inherit some money, then they may inadvertently lose their government assistance.
Trusts Can Be Used to Place Strings on Distribution to Beneficiaries
A Trust is also a very good way to place some ‘strings' on the distribution of an inheritance to a person. It is not that uncommon for a client to have a child who is financially immature for their age or is in their early 20's and the child just wants to have fun and has no direction in their life. A parent does not want to leave a large inheritance outright to their child. The parent knows that it took them a lifetime to build up their assets, and they do not want their child to spend it all in one or two years.
A parent can then set up a trust whereby the child only receives ‘income' from the trust or the child receives their trust share upon reaching a certain age or graduating from college. By placing ‘strings' on the child's trust share, the parent can be assured that the child's inheritance will not be spent all at once.
There are a variety of other circumstances as to why a trust may be a good estate planning vehicle for a person to utilize. However, every person's situation is different and unique, and not everyone should have a trust.
[1] O.R.C. 5816