trusts

You might want a trust if.... “Do I need a trust?” Although it's a legal question, it's frequently asked of financial advisors. What do they say?  “Hey, I’m not an attorney,” is one possible—but maybe not the most helpful—answer.  “Hey, I’m not an attorney, but I can play one,” may be polite, but inadvisable.  “That’s interesting you bring that up. I’m curious how you heard about trusts.” This reply seems a little better. It keeps the focus on the questioner, and it’s pretty safe legally.  Pros and Cons of Trusts  Answers people may give for curiosity about trusts range from, “I dunno," to citations of articles, websites, conversations with friends, family members, or even an estate planning attorney. All of the mixed messages about them can get pretty confusing.  For some people, trusts are a mysterious-yet-evil domain of the ultra-rich. This belief isn’t surprising. When was the last time you saw positive media coverage of a trust? It typically pops up when a billionaire’s “trust fund baby” is arrested.  There are dozens of kinds of trusts. For this post, “trust” means a revocable living trust. They tend to be the most common and relevant.  Trusts aren’t for everyone. They are costly to set up. Some people have difficulty implementing and maintaining them. They are powerful. Scary powerful, sometimes. Rather than answering, “Do I need a trust?” directly, I prefer to channel comedian Jeff Foxworthy’s famous phrase, “You might be a redneck if …” (anyone under 40 may have to look him up). It seems to help people discover for themselves whether a trust might be useful. 7 Reasons You Might Want a Trust 1. If you own property in more than one state or country, you might want a trust. Trusts avoid probate—if drafted, executed, and implemented properly. Property in two states/countries means probate in two states/countries. In many states, probate attorneys charge a percentage of the probated asset value. Dollars spent now on a trust could seem small compared to the dollars spent on lawyers and court fees in two places later. 2. If you are concerned about a grown child’s ability to handle money, you might want a trust. A child gets the money with no strings attached if left through a joint account, will, payable-on-death (POD) designation, or beneficiary designation. Trusts let you build strings. One common example is to pay one-third of principal at age 30, one-third at age 35, and the remainder at age 40. As your family ages and changes, you can revise trust provisions like these. Revocable living trusts are amendable. 3. If you have a concern about a child’s current marriage, you might want a trust. Trusts can be written so that inherited assets can be protected in a divorce. Assets inherited other ways, especially if commingled with other marital assets, can be harder to protect. 4. If you have a concern about a child’s future marriage, you might want a trust. Trust provisions can be written for future spouses, too. 5.…