Are Trusts Only For the Wealthy?

By Jessica S. Batsevitsky
 
When I meet with clients, we often discuss whether one or more trusts might help achieve their estate planning goals. More than one client has remarked that he or she thought trusts were “only for the wealthy.” Media images of “trust fund babies” help to create this misconception.

So what are trusts, and are they really only for the wealthy?

A trust is a legal relationship. One person or entity (the “Settlor”) transfers property into the hands of another person or entity (the “Trustee”) to hold and manage the property for the benefit of a third person or entity (the “Beneficiary.”)

Trusts are useful tools whenever it is preferable to have funds held for another by a third party, rather than giving funds outright.

Examples include:

1. Placing inheritances into a trust for children, rather than giving them property outright, can protect funds from youthful inexperience or an expensive court-appointed conservatorship. A trustee can manage and spend funds on the children’s behalf until they reach an age when they are ready to manage significant amounts of money on their own. 

2. Transferring funds into a trust, rather than into a beneficiary’s individual name, may reduce the size of the beneficiary’s estate at death, resulting in less estate tax liability. 

​3. Funds held in a special needs trust can benefit a beneficiary with special needs without negatively affecting his or her entitlement to public benefits. 

Trusts are not only for the wealthy. Trusts can be helpful to individuals and families of many ages and income levels, in order to achieve various estate planning goals. A qualified estate planning attorney can help you to understand the benefits of trusts for you and your family.