10 Reasons to Create a Trust

Disability

According to the Center for Health Statistics, most of us will survive a critical illness, like cancer, heart attack or stroke. Without a properly drafted power of attorney and amendable trust, court intervention may be required to administer your assets or to make health care decisions for you during your disability.

Joint Tenancy

When you own assets like your residence or bank accounts in conjunction with one or more individuals, probate may be avoided in some instances, but at the cost of leaving the whole of the property to the survivor. However, if your preference is to pass on your property to both a spouse, children and other loved ones, joint tenancy impedes the process. Joint tenancy may also create additional taxes when your survivor sells the property following your death.

Taxes

Did you know that by gifting property you own during your lifetime, your beneficiary may realize a taxable gain to the IRS? A proper estate plan can create no taxable gain by gifting the same asset to a loved one upon death.

Children

Your children are not grown or if grown are not financially responsible. If minors, should you prematurely die, your assets may be managed by another individual, perhaps your spouse, but only after the court intervenes to establish a guardianship of your estate. Even if your children are grown, you may prefer to put restrictions on the distribution of your property to avoid fiscally imprudent spending habits by a child, or even to deter use or appropriation of funds by your spouse to the detriment of a child.

Children Revisited

The biggest mistake most of us make is the assumption that your spouse will inherit everything when you die. In fact when you fail to write your own will or trust, the State of California provides its own rules for distribution. The children, including minors, all share distribution with your spouse. This may create a financial hardship for your surviving spouse.

Your Privacy

The process of probating your property through the court requires that formal notice that your assets are being administered be given to your relatives in many instances beyond your spouse and children. Inherent in probate court is the greater ease by disgruntled family members to challenge provisions made for loved ones. In contrast, a trust is inherently more private and confidential and designed to avoid administration through the court.