Do you need a trust for your estate plan?

Wills and/or trusts make up the backbone of any estate plan. Some people are under the impression that a trust is required to achieve their estate planning goals. It is certainly true that many families and individuals can realize substantial benefits through the creation of a trust. For instance, assets in a trust are not subject to the probate process. As a result, your beneficiaries can receive assets without waiting for the probate process. With this said, a trust is not necessarily the right estate planning tool for everyone. 

When might a trust be unnecessary?

While everyone's situation is different, here are some situations in which a trust may not be the right estate planning tool.

  • >Your assets are not likely to be impacted by the estate tax: One key advantage of a trust is that it allows families and individuals to structure their assets in such a way that minimizes the potential impact of the estate tax. The current federal estate tax threshold is $5.49 million for an individual and $10.98 million for a married couple. The current Basic Exclusion Amount (BEA) for New York's estate tax is $5,250,000 for an individual. If your current estate is below these amounts, a trust may not necessarily provide any tax advantages, although it may certainly have other uses.
  • Your intended heirs are capable of making appropriate financial decisions: A trust can be one way to prevent a spendthrift heir from quickly spending down his or her inheritance. Trusts can be instrumental in protecting the interests of adult children with special needs. If your intended beneficiaries do not fit these categories, a trust may not be necessary.
  • You do not own a complex array of assets: For instance, if you own a home and have assets saved in retirement accounts, it can be relatively simple to pass these assets along upon your death. On the other hand, if you have investment properties or other real estate holdings, or if you own a business, a trust may be a viable method of passing these complex assets to your intended beneficiaries the way you deem appropriate.

Above all, estate planning decisions are very important. These decisions have the potential to impact your loved ones for years to come. These decisions should not be made without seeking counsel from a knowledgeable estate planning attorney.

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