Like so many things in life, trusts get a bad name because they are misunderstood.
Is a trust a nebulous concept which can be difficult to understand? Sure.
Does the creation of a trust take thought and planning? Sure.
Are some people confused about how to properly draft a trust? Sure.
Talking about a trust is like talking about a car. There many different types of trusts so saying that you have a trust is like saying that you have a car. It really doesn’t tell a person much.
I grew up on a farm, and when I decided to go off to the big city for college, my dad decided I needed to buy a reliable car. Dad and I went car shopping together. Honestly, I didn’t know much about cars but there were certain features I thought I needed in my new vehicle, and as I’m sure you guessed, the things I thought I needed where not the things my dad thought I needed. For example, I always thought a sun roof would be really cool so I wanted a sun roof in my new car. On the other hand, my dad couldn’t have cared less about the sun roof. He thought I needed something really practical like 4-wheel drive. I thought I needed a good stereo system. My dad thought I needed power locks with a feature that triggered the car doors to lock when I started the car. I thought I needed a pretty color for my new car. My dad thought I needed a car that sat high enough off the ground that when driving in heavy traffic I could hold my own against the big tractor trailers. I despise sitting on cold car seats so I thought I needed heated leather seats. My dad thought I needed airbags.
Needless to say, I have a 4-wheel drive SUV with power locks . . . although I did get the heated seats.
What I have learned since my car shopping experience with my dad is that like buying a car, establishing a trust is specific to a person’s goals. Once you decide what you want to accomplish in buying the vehicle or establishing the trust, the process becomes much easier.
When I meet with clients, there are some common goals that clients mention: (1) protecting assets from creditors, (2) planning for long-term care, (3) creating a lasting legacy, (4) minimizing federal estate and income taxes, (5) planning for retirement, and/or (6) providing for a person who has special needs. Sometimes multiple trusts are used to achieve the client’s goals or one trust is used to achieve all of the goals.
A trust if properly drafted should achieve all of your objectives and offer you the most flexibility possible. Despite what people think, trusts can offer simplicity, flexibility, and predictability.
As I mentioned, I ultimately bought a vehicle that included all of the features my dad thought I needed, and I couldn’t have been happier with my investment. As I said, I know nothing about cars; however, my dad does. He is comfortable around cars. He routinely fixes cars and is constantly tinkering with vehicles of all shapes and sizes. That is the key . . . If you don’t know much about something, then find someone who does and ask that person’s advice. If you want to protect your assets from creditors and long-term care costs, create a lasting legacy, minimize taxes, and/or provide for a person who has special needs, a trust may be your best option so talk with an attorney that is comfortable with and knowledgeable about trusts. You will be less confused and more satisfied.
If you asked me today if the color of my car is important, I would tell you that it is not. What is important about my car is that it gets me where I need to go; after all, that’s why I bought the car. When winter comes and I need to go somewhere, the color of my car isn’t what gets me there. My dad was right; I need the 4-wheel drive to get me where I want and need to be.