Q. My neighbor told me she created a trust and said that I should create one, too. How do I start?
A. Just because your neighbor created a trust does not mean that you should also create one or would benefit from it. There are many types of trusts and they are not for everyone. If your situation warrants creation of a trust, it is a great vehicle for estate planning. If not, you would be spending money and time needlessly. A trust is a legal entity which holds assets for the benefit of certain persons; however, a trust is not a person. Depending upon the type of trust, it may have its own tax identification number or share yours.
Are you considering Medicaid planning? Are any of your beneficiaries spendthrifts, addicts (e.g. gambling, alcohol, drugs, etc.)? Do any of your family member beneficiaries receive governmental assistance which they would lose if they receive significant funds from you? Do you believe that your beneficiaries may not be sufficiently mature to handle large sums of money if you died and they inherited your assets? Do you want to make things easier for your family after you die by having all assets basically in one basket? Do you dislike your daughter’s (or son’s or fill in the blank) boyfriend or husband and want to be sure no money goes to him if/when your daughter inherits? Do you want your funds to be used for the benefit of a beneficiary only for a specific purpose, e.g. education/tuition costs, healthcare expenses, home purchase, etc.?
Those are all good reasons to create a trust. They are many more good reasons, too, which are beyond the scope of this article.
It’s all about control - that is your control of your assets or loss of control of them. If you do not want to give up control and do not have any of the above reasons or situations in your life, you may not need a trust. An experienced estate planning attorney will look at your entire picture, including family and financial situation and advise you. A trust is not like other estate planning documents. Every adult (in New York, age 18 years or older) needs a Last Will and Testament, Power of Attorney, and Health Care Proxy. That is not the case with a trust.