How Could a Trust Help You and Your Loved Ones?

The following are several of the most common reasons why a properly drafted Trust may be beneficial to you and your loves ones:

1. Avoid Probate
The term “probate” refers to the legal process for the administration of a deceased person’s estate. Trusts are celebrated as the most comprehensive way to avoid a potentially expensive, public and time-consuming probate proceeding.

About ten thousand probate cases are filed each year in the state of Arizona, and the Arizona Probate Code provides for a “formal” proceeding where the court is directly involved in the probate procedure. The average cost of probate is 4% to 10% of the gross estate, and the average length of probate throughout Maricopa County is 13 months.

[Statistical data retrieved from Banks, Darrell R. (2000). What is Probate? Retrieved July 11, 2008, from]

2. Reduce estate taxes
In 2012, up to $5,000,000 per person is exempt from estate taxes. What may happen to this ceiling in 2013 and beyond is uncertain.  Accordingly, for larger estates, a properly drafted trust can literally save you hundreds of thousands of dollars.

3. Maintain control over your estate
Estate planning is about control. With a trust, you exercise control over your assets–even long after you have passed away.

4. Avoid guardianships
In the event that you are ever disabled or incompetent due to illness or accident, a trust can prevent a Court from intervening and appointing a guardian or conservator to act for you.

5. Protection of beneficiaries with special needs
Let’s assume that you leave $100,000 to your son, who is disabled and receives government assistance. When you die and your disabled son inherits the $100,000, the government may cut off his benefits and force him to spend the $100,000 to care for himself. A properly drafted trust could prevent this unfortunate situation from occurring.

6. Protection for your children or minors
One of the most common reasons for a trust is to care for your children or minors. Many people worry about giving inheritances outright at a young age because young people are sometimes not very good with money. You may feel that it is better to allow your children to use the property and assets you leave them only when they reach an age of greater maturity, when they better appreciate the value of money and are more responsible with it. A trust can be specially tailored to provide that your minor children or grandchildren only obtain the assets when they are older and more mature, or for their health or education.

7. Maximize Protection for your loved ones
A properly drafted Trust can protect your loved ones and ensure that your wealth is transferred to them in a safe and responsible manner. Some of the protections that Trusts can offer to you and your beneficiaries are:

A. Protection from creditors
Let’s assume that in your Will, you leave $25,000 to your daughter. If your daughter has $25,000 worth of credit card debt, her creditors can take her entire inheritance. This could be prevented with a properly drafted trust.

B. Protection from divorce
Let’s assume that you leave $100,000 in your Will to your son. You die, your son inherits the $100,000 and invests it together with his wife. A few months later, your son’s wife files for divorce and is awarded half of that $100,000 as part of the divorce settlement. Because you did not have a trust, you have essentially given $50,000 to your ex-daughter in law.

C. Protection from Substance abuse problems
Let’s assume that you leave $50,000 in your Will to your son, who has a problem with drinking and drugs. When you die, your son inherits $50,000, which fuels your son’s drug problem for a few brief months until the money runs out, leaving him worse off than before. This situation could be prevented with a properly drafted trust.