4 questions can help protect yourself and your assets
We all like to be independent. We like to make decisions for ourselves and determine what happens to us, our family and our property during this life and after we die.
That’s why we should place trust in, well, a trust.
“Trust agreements are a great way to achieve a client’s objectives in the administration of their ‘stuff’ when they pass on,” says Sonny J. Olsen, an equity partner with Heideman, McKay, Heugly & Olsen, LLC, a law firm in Provo specializing in estate planning and probate litigation. “Different types of trusts may be created to accomplish specific goals. They’re flexible, and this is a critical reason for choosing a trust versus a simple will.”
What is a trust?
Simply, a trust is an agreement, set forth in writing, under which money or other assets are held and managed by a trustee for the benefit of others (including children, siblings, disabled persons, etc.).
“There are many different kinds of trusts available,” Sonny says. “Trusts may be classified by their purposes, by the ways in which they were created, by the nature of the property they contain and by their duration. The fact is, anyone with children and/or $250,000 or more in life insurance should have a living trust agreement.”
Why is a trust useful?
Part of why the investment pays off is because trusts make it possible for your estate to avoid probate — the court-supervised process to validate a will and transfer property on the person’s death. Probate can be as expensive as some types of trusts and doesn’t allow for personal control of what happens to your property.
Trusts establish the quickest and generally most effective means of controlling or administering property.
“They provide personal and financial safeguards for family and other beneficiaries as the trust is administered according to your wishes and desires. One major consideration of trusts is that they, when properly crafted, can postpone or altogether avoid unnecessary taxes, which is why you need an expert in this area,” Sonny says.
Who should set up a trust?
Trusts can specify how life insurance money is paid out and to whom it’s paid, who will receive what assets from an individual’s estate, and they can clarify things such as who takes custody of young children should the parents pass on prematurely.
Although trusts are inexpensive compared to costly probate proceedings, it does cost money to set up a trust, so young, single people may not want to make the investment until there are more assets to protect. Legal fees for setting up a trust are usually in the ballpark of $1,500.
However, the alternative (probating a valid will) would be more costly and subject heirs to court proceedings.
Depending on the complexity of the circumstances, total probate costs are estimated to run 2 percent to 7 percent of the value of the estate, which equals $2,000 to $7,000 for an estate (house, cars, stocks, bonds, bank accounts, etc.) worth $100,000.
In summary, trusts are the most effective way to administer your estate, they do not involve oversight by the court and they are less expensive than probating a valid will.
How should I go about setting up a trust?
First, you should have a qualified, experienced attorney assist you. The attorney will understand how to word the trust to accomplish exactly what you want it to accomplish. He or she can also be a valuable third-party adviser. You may also want to get advice from your financial planner or accountant.
Setting up the right kind of trust — which your attorney can help you determine — will protect you, your family and your assets from the decisions of the court.
And it will supply you with that one last opportunity for independence. UV
Heideman, McKay, Heugly & Olsen, LLC, is a full-service law firm that focuses primarily on business litigation, contracts, real estate transactions and estate planning. The firm’s clients include many established and growing businesses, and it has offices in Provo, St. George and Price.