Recently I have been meeting with several clients who contacted me because they hear on the radio or from family members that they need to create a trust. They aren’t sure what kind (revocable or irrevocable), but they just know that they need one. The first question I usually ask them is what their goals are. Sometimes, as it was with a recent client, they simply do not need one at all.
Trusts are good vehicles for controlling your assets for your children after you die, avoiding probate, minimizing estate taxes, and protecting assets. The type of trust you need depends on what you are trying to accomplish. For clients who have children with special needs, a supplemental needs trust is an excellent way to provide for disabled children who currently or will receive public benefits.
In February, I wrote about the considerations for an irrevocable trust. The main difference between a revocable trust and an irrevocable one is accessibility (or control). When you create a revocable trust, you can be the trustee, and you can add to and withdraw from it at any time. It also does not need to be funded until after your death (but it can be funded at any time). Revocable trusts are excellent for ensuring that your minor children do not receive their inheritances outright at age 18 should something happen to you before then. You can decide now what they can use trust funds for later. You can also prevent them from receiving large distributions if they might have a substance abuse or gambling problem. In other words, you can control from your grave how much they receive and when they receive it. And even for post-college aged kids who may not be responsible with money, these are an excellent way to provide some protections from themselves and creditors.
Revocable trusts are also good for avoiding the probate process, which in New Hampshire, can be expensive and time consuming. In other words, your estate will pay now or pay later, and in the former, you alleviate a burden for your loved ones.
In short, if you have no minor children (or young adults) and have very few assets that won’t require a large or expensive probate, then a revocable trust may not be necessary. Each client’s case is different, and many factors go into the analysis of when a trust makes sense and what kind.