Should I create a trust even though I don’t have a multi-million dollar estate? My answer: It depends. Often estate planning goals can be achieved without establishing a revocable living trust, but there are instances when one is recommended. It all depends on your family situation and what you want to accomplish. I often use stories such as the following to help new clients better understand the benefits of having a trust.
George and Jenny have been happily married for 25 years with three children, Jessica, age 20, Josh age 15, and Jonathan, age 12. Both George and Jenny have created wills, leaving everything to each other. After they are both gone, their wills leave it all to their children, in equal shares. Sounds like a logical plan. Or is it?
Tragically, George dies suddenly and, according to his will, all of his property transfers to Jenny. The following year, while rushing to an appointment on a rainy morning, Jenny loses control of her car and rear ends a bus full of trial attorneys heading to the annual Ft. Lauderdale “I’ll See You in Court Convention.” Several attorneys are injured and predictably, lawsuits follow. Now what happens to Jenny’s inheritance from George? It likely all goes to creditors. What’s left to raise her children? Perhaps nothing. If George and Jenny had used a trust in their estate plan, the final outcome may have been different. While Jenny’s property would still be subject to creditor claims, her inheritance from George inside a trust would be safe for her and their children.
In another sad scenario, imagine that Jenny dies first and George later remarries Susan, a woman with four adult children. What happens when George passes? His property, including what he inherited from Jenny, may go to Susan and eventually to Susan’s children. George and Jenny’s children could be completely disinherited! With a properly drawn trust, George and Jenny can rest assured that even if the surviving spouse remarries, their money will go to children.
Finally, think of George and Jenny happily enjoying retirement and grandchildren, but not fond of Jessica’s husband, Jason. Jenny fears that their son-in-law will never earn a decent living, and be dependent on their daughter Jessica to support him for the rest of his life. George worries that if they leave an inheritance to Jessica and she ultimately divorces Jason, a substantial portion of Jessica’s inheritance could be lost to her “no good husband.” If George and Jenny leave inheritances to their children in a trust, these assets will not be commingled with marital property. Therefore, in the event of a divorce, daughter Jessica’s inheritance will not be the subject of division and partial distribution to son-in-law Jason.
Making the right estate planning decisions is important. Speak with a qualified estate planning attorney to see if a trust is right for your family situation.
Life can change in an instant. What are you waiting for?