Minnesota Estate Planning Blog

Estate Planning Pitfall: Not using a trust when you should

Determining if a trust is appropriate for you depends on your objectives and your needs. Suppose, for instance, you have adult children in whose ability to handle the financial responsibility of inheriting your estate you have complete confidence. You’re unsure whether the idea of keeping assets in trust for them after your death is appropriate.

It would still make sense to use a trust during your life, as doing so will allow for the seamless transition of control of the assets at your death. And assets held in your trust prior to your death will pass to the beneficiaries without being subject to probate, which can be expensive and always is a public process.

In deciding whether to keep assets in trust after your death, though, you need to weigh the disadvantage of burdens — and, more important, the idea of having the assets “tied up” rather than going outright to your children — against the potential estate tax benefits down the road. 

Your circumstances will help to determine whether the assets should remain in trust. For instance, depending on the size of your estate, the trust can provide a means of keeping assets outside of the estate tax system forever or, at a minimum, for at least a generation.