TOP DRAWER ARTICLE

Trusts
by
HL Carpenter

So you’re thinking of looking into that free lunch offer you received in the mail or read about in the newspaper. You know, the one that says you ought to have a trust, and you can learn why by attending a seminar, eating a sandwich and listening to a speaker. You know it’s a sales pitch – somebody has to pay for your meal – but you’re left to wonder if maybe you do need a trust.

Here’s some information to chew on before making your reservation:

• A trust is a legal entity formed under state law. Both state and federal tax regulations apply to trusts, so income tax savings are typically non-existent. However, a properly established trust can offer estate tax advantages, and a trust can help your heirs avoid probate, a plus if it’s an expensive and lengthy process in your state.

• Trusts have many names, but there are two basic types. Revocable trusts can be changed any time during your life. Irrevocable trusts are permanent and usually can not be retracted or revoked.

• Trusts are financial planning tools. There’s nothing mysterious about establishing and maintaining one, though it costs money and takes time. You’ll have to name a trustee, transfer assets, maintain records and update trust documents periodically to reflect changes in laws and your personal situation.

• Trusts are useful in special circumstances, such as when you have minor children or a relative who is unable to oversee his or her own support. If you or your spouse have children from a former marriage, a trust can protect their interests.

If you’re unsure whether or not you need a trust, consider taking your financial advisor to lunch instead of attending a seminar. After all, when you’re talking about trusts, doesn’t it make sense to talk to someone you trust?

Originally published July 2006.

Last update: January 8, 2011