What a great question! I’ve received many questions about trusts recently from different folks, at different stages of life, and with different goals. So, I’m going to share my thoughts on why a trust is beneficial for someone at any stage of life . . . and I’m going to to it as a series of posts, specifically addressing two of the more common stages – married with young children, and retired (or nearing retirement) with an empty nest. Before reading on, I would first suggest you read my post on what a trust is.
Married With Young Children
If there was only one common misconception about trusts (there are many more!), it would be that they are only beneficial for “wealthy” or “rich” people and those are the only people who can afford them. That couldn’t be farther from the truth. Trusts are increasingly being used as a way to avoid probate and “substitute” for a will (more on that later).
Many folks with young children don’t feel like a trust could benefit them because they don’t “have much stuff.” And usually they mean valuable house, cars, money in the bank, retirement accounts, brokerage accounts, etc. One of the items they commonly overlook is life insurance. I highly recommend that every parent of a minor child have life insurance as a means of providing for their children if something happened to the parents. Many people have a much larger estate if they take their life insurance into consideration. With that understanding of what you have, consider these benefits of a trust for parents with minor children:
- Avoid probate – the court process your assets must go through to the extent you pass away with any assets titled in your name. Probate is public, can take a long amount of time (many months to over a year), and can be costly.
- Manage the funds for the children’s benefit on your terms not the terms of a court appointed guardianship estate
- Have your children receive what you’ve provided for them when and how you determine. You can set it up so they have access to it for only certain items, that they get access to more of it at stated ages, have it benefit them during their entire lifetime and then on to your grandchildren, and protect it from creditors, divorce, and lawsuits. You can set whatever conditions or lack of conditions you want (subject to public policy considerations).
- Provide for immediate management of your assets if you are disabled. By naming a successor (back-up) trustee, you can ensure there is someone to immediately take over providing financial assistance to your family if you are disabled or incapacitated
- Provide for the care of a pet. Michigan recognized “pet trusts,” as a way to ensure your pets are taken care of as well.
These are just some of the benefits a trust can provide a family with young children. If you have questions or would like more information on any specific item, please contact us. We are always happy to help parents make the best decisions for their family throughout their lives.