Can a trust help retirees with distribution of assets?

Discussing death and other unexpected life changes are troubling thoughts for Pennsylvanians. Here in Kennett Square, many residents, and retirees in particular, are now planning their estates to ensure that properties and assets will be distributed among their rightful heirs when they die. However, choosing which estate planning tool best fits a person’s situation can be more than a matter of preference.

Trusts are one of the most common estate planning methods in Pennsylvania. A trust allows an individual to transfer property and assets to a trustee, who handles the assets for the benefit of the beneficiaries or heirs. The trust maker or “trustor” can create a trust during his or her lifetime, called a living trust. While the trustor is alive, he or she will fulfill the roles of both trustee and beneficiary. The trustor can name additional trustees and add more assets into a trust simply by retitling or modifying the trust.

Creating a trust has many benefits. First, it allows the trustor to micromanage his or her property and assets, even following his or her death. Second, a trust can avoid heirs avoid probate. Third, a trust ensures that financial affairs will remain private and court involvement in the process can be minimized. Fourth, a trust may be more flexible than a last will and testament because it allows greater control over his or her assets, allowing him or her to effectively distribute the properties and assets. Fifth, a trust can help heirs avoid costly estate taxes.

A trust has certain disadvantages, too. Setting up a trust is likely to be more costly than a will. Additionally, unlike a will, a trust cannot be easily dissolved.

Before creating a trust, it is important to consult a knowledgeable estate planning attorney who knows which type of trust best fits the potential client’s needs. By doing so, the creator will maximize benefits of the trust, while still avoiding potential pitfalls that could affect the distribution of assets.

Source: Forbes, “Wills vs. trusts: what’s best for retirees?,” Thomas and Robert Fross, Feb. 18, 2014