Michiganders might be interested in a recent article by a retired probate judge who offers advice on some of the most common estate planning mistakes people should avoid when preparing for their families’ futures. In this particular article he discusses the use of trusts to protect the assets of an estate, however the information is general and the laws do vary from state to state. Check with an estate planning attorney in your area to learn more about estate planning laws applicable in your state.
It is possible to use a last will and testament to establish a trust. Although it requires the use of a probate court, it is a common way in which to establish a trust without the use of a revocable trust. This type of trust will start during or at the end of the probate proceeding, which administers your estate and distributes its assets.
An estate planning attorney recommends establishing a trust when there are minor children involved. Without a trust, a guardian would be appointed by the probate court in the event you become incapacitated or die and are unable to care for them. If there is a large life insurance policy to be paid to your estate upon your death, it is important to ensure that the beneficiaries you have designated in your policy match that of your testamentary trust. This will protect your minor children
If the court appoints a conservator to manage the minor child’s assets, he or she will be required to file a detailed list of income and expenses each year, which includes an annual fee charged by the court. One of the benefits of setting up a testamentary trust and naming a trustee is avoiding the annual reporting requirements. Additionally, the information regarding the trust’s assets remains private, whereas a conservatorship file is a document available to the public.
There are many considerations involved when selecting the type of trust you need and what you want the trust to accomplish. And choosing a trustee is just as important as selecting the right estate planning tools for your individual goals. An estate planning attorney can help you understand all that is involved in the preparation of a trust and the role of a trustee and guide you through the entire process.
Source: The Missourian, “Common Estate Planning Mistakes Failure to Use Testamentary Trusts,” Arthur A. Murray, March 28, 2012