When people are contemplating how they would like their savings and property to be distributed after their death, they often think about whether a trust will assist their family members in avoiding a lengthy probate process and in lowering or avoiding taxes. While these issues are certainly important, they should also be asking themselves what type of trust is appropriate for them.
While traditional trusts are created to avoid probate and minimize taxes, they are not intended to provide protection prior to the death of the testator. Nor are they designed to safeguard your assets following your death so that they can be helpful to your beneficiaries.
It is important for people to have a comprehensive estate plan that includes both pre-death as well as post-death planning. As reported by the Census Bureau, between 2010 and 2030, the number of people age 65 or older will rise from 13 percent to 20 percent of the entire U.S. population. According to the Alzheimer’s Association, within that age group there are 5.1 million people who suffer from Alzheimer’s disease and other kinds of dementia, which can cause a decline in mental capacity prior to death.
There could be dire consequences if trust documents fail to take into account the potential for the grantor’s loss of capacity and eventual inability to pay expenses, and/or care for him- or herself. Frequently, trust documents may be devoid of the language needed to shield the grantor’s assets from financial predators. Inclusion of a pre-death plan into trust documents can ensure that an individual’s needs are met in the event that the person suffers a physical or mental disability, on a temporary or permanent basis.
Additionally, the post-death planning part of the trust permits a person to have control over the distribution of assets to the children or grandchildren by safeguarding the inheritance for successive generations and paying for various expenses, including health care costs and tuition.
Furthermore, having a living trust can help ensure that your assets are managed for your benefit while you are alive, and then transferred to your heirs upon your death. A living trust can also help make certain that your assets are managed in accordance with your wishes in the event you are no longer able to manage them yourself. You can designate a trustee to assume control of the trust if you become incapacitated or no longer wish to have management responsibilities concerning the trust. The trustee will be in charge of implementing your directions stated in the trust, and distributing your assets to your beneficiaries.