There are practitioners out there who will say that everyone needs a trust, there are some who say that it depends, and there are some who will try to avoid them at all costs. I am of the opinion that it really depends on your individual situation. However, in order to determine whether you need a trust or not, you need to understand some of the benefits.
Avoiding Probate: Avoiding probate is probably the greatest advantages of having a trust. The trust itself is its own entity, and this is what allows trust assets to pass outside of the probate process. This single reason is often enough for many to create a trust, especially if that person has a large estate that would subject to an expensive and lengthy probate process. The time and fees that are involved in administering a larger estate can be enormous. With that said, sure, there are going to be fees and taxes involved in establishing most trust, but this is something that needs to be weighed before you go through with creating a trust. The good news is, those initial fees usually outweigh the typical probate expenses.
Privacy: In addition to avoiding probate expenses, a trust also avoids the publicity of administering an estate. The trust itself is not subject to the same disclosure as a will. This means that you do not have to publish to the world what you are doing with your assets when you die, like you essentially due when you probate a will.
Control: Aside from providing for management of assets both before and after death, they protect the beneficiaries by giving control of the trust fund to the trustee by limiting the beneficiary’s rights to receive income or principal. This is probably the only way that you will be able to protect the interests of your beneficiaries after you die, in the way that you believe to be in their best interest.
Beneficiary Protection: In addition to control, a trust protects the interests of the beneficiaries. For example, it is not wise to leave money to younger children, it is usually not even permissible to leave money (without a custodian, guardian, etc.) to a minor child. If assets are left directly to a minor child, that money will need to be held by that child’s guardian who must report to the court everything that he or she does with the assets until they reach the age of majority. If a trust is utilized, your trustee will manage the assets and distribute income or principal based on the terms of the trust agreement, and the trustee is under no obligation to report to the court.
Disabled Beneficiary Protection: Protecting the interests of disabled beneficiaries warrants its own section. Most people do not understand, perhaps they do not know that if they give virtually any money to a disabled beneficiary that is receiving supplemental state or federal benefits, they are likely to lose those supplemental benefits. With a properly drafted supplemental needs trust, the benefits of the disabled individual remain intact. This type of trust allows a trustee to pay for the things that government programs will not. In addition, it remains the complete discretion of the trustee distribute money from the trust. This is how the trust preserves its assets from creditors and/or the government.
Those are some of the main benefits that you find in common trusts. If you are interest in a trust, you have to evaluate your situation and find the appropriate kind of trust that matches the purpose that you would like the trust to serve.