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An Indiana attorney on why you should have a trust

Indiana estate attorney

Make no mistake about it: trusts aren't only for the wealthy. Anyone can benefit from having a trust.

Unfortunately, many people fail to see the benefit of estate planning until it's too late. For those who do recognize the benefits, last wills are often established in order to pass property and assets along to a spouse or divide it among children. Having a trust is an often-overlooked component to estate planning.

An article in the financial magazine Kiplinger discusses why it's important to have a trust and how you can go about establishing one.

What is a trust?

A trust is simply an agreement between a settlor and a trustee. A trustee, also called a fiduciary, is responsible for:

  • Accepting, managing and protecting the settlor's assets
  • Administering assets as instructed by the settlor
  • Distributing income and principal specifically for the benefit of parties identified in the trust
  • Selecting investments
  • Prevent conflicts of interest and self-dealing
  • Purchasing and selling assets
  • Avoiding breaches of any duties to the settlor or beneficiaries

In addition, a trustee must abide by the trust terms set forth by the settlor. Any administrative or investment decisions made must be done in a prudent and reasonable manner.

Why establish a trust?

In order to determine if a trust suits your estate planning needs, you should first consider the following reasons for establishing a trust.

The most common purposes of a trust include:

  • To protect beneficiaries from poor judgment and waste by regulating spending and investments
  • To prevent court-supervised probate of assets
  • To protect assets from beneficiaries' creditors
  • To prevent premarital assets from being divided among divorcing spouses
  • To designate funds in the event the settlor becomes incapacitated
  • To avoid challenges of dividing unique assets such as vacation homes, pets, and recreational vehicles
  • To designate business assets for business succession
  • To collect tax-free proceeds from life insurance to care for beneficiaries
  • To take advantage of tax benefits from charitable gifting

Getting started on your trust

If you're considering establishing a trust, Kiplinger suggests first determining how you will fund your trust. You may do so in the near future, over a long period of time through period gifts, or you can wait until your death to fund it.

The most common trusts are revocable trusts (also called living trusts), which is usually funded at the settlor's death. It involves instructions regarding how the estate will be divided and how each beneficiary's share will be managed. For example, if you have children under age 18, your trust may designate who will provide funds for education, health costs, and other needs until they reach adulthood.

A revocable trust, however, will allow you to change the terms and instructions previously established. For example, when your children turn 18, previous instructions regarding education and health costs may no longer be necessary. That's why it's important to revisit your revocable trust every five years to determine if some terms should be added or removed.

Before you get started, it's important to consult with an experienced Indiana estate planning attorney. The legal team at Hocker & Associates LLC can help guide you through the process and help you avoid any legal complications in the future. Contact us online to learn how we can help.

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