Why Do People Use Trusts?

Written by: Michael Carbone, CFP®

A trust is a written legal document that’s commonly used for estate planning purposes. Estate planners often recommend using trusts to help transfer wealth to surviving family members. Why? Generally, trusts can help us potentially:

  • Avoid the probate process
  • Reduce estate taxes
  • Control how our assets are distributed to our beneficiaries
  • Control access to assets in the trust even after our passing
  • Protect our assets from creditors, etc.

On Avoiding Probate

In probate the courts will validate your will and supervise the distribution of your assets. Many people prefer to avoid the probate process. Why? Generally:

  1. The probate process can be expensive.
  2. The probate process can be lengthy.
  3. The probate process is public record – some prefer to maintain their privacy to the extent possible.

On Potentially Reducing Estate Taxes

In some cases, trusts can be used to reduce the amount of estate taxes due on our passing – or on the passing of the surviving spouse. This is more common with larger estates, which exceed amounts that are excluded from federal taxation, or in states with death taxes, etc.

On Controlling How Assets Are Passed

Some people prefer to control how their assets are accessed by survivors– even after their death. This is sometimes referred to as, “controlling from the grave.” This is particularly relevant for those with young children, beneficiaries with disabilities, beneficiaries with dependency issues, etc. This is often accomplished via the use of an irrevocable trust, which can be funded during your lifetime, or upon your passing.

On Protecting Assets

Trusts can sometimes be used to protect our assets from creditors. This is often accomplished by moving assets out of our name via the use of an irrevocable trust.

In summary, trusts can be used for many purposes. This article only touches on a few of the more common strategies for the average household. Your Attorney will counsel you on the appropriateness of different strategies – in addition to any cost/benefit tradeoffs, etc. Your financial advisor is often the person who coordinates this effort and motivates you to act!

Please don’t hesitate to reach out to discuss these topics in greater depth. I can be reached at 978-455-7799 or Michael.carbone@raymondjames.com

Thanks for reading!

Michael Carbone, CFP®

Important Disclosures

Financial and investment planning inherently involve potential tax and legal implications, with which we are generally familiar. We do not, however, practice as lawyers or CPAs and cannot give specific legal or tax advice. You should always consult with your tax advisor, or your attorney, when making complicated legal or tax decisions, however, we’re glad to work with your tax or legal professional to help you meet your financial goals. Raymond James financial advisors do not render advice on tax or legal matters.

Any opinions are those of Michael Carbone - not necessarily those of Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we not guarantee that is accurate or complete. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

Past performance is not indicative of future results and there is no assurance that any investment strategy will be successful.