Although everyone needs to have an estate plan, the Last Will and Testament may not be the only, or even the best, solution, suggests Rob Culos of Culos & Co. Law.

Although everyone needs to have an estate plan, the Last Will and Testament may not be the only, or even the best, solution, suggests Rob Culos of Culos & Co. Law.

When should a person set up a trust?

A trust can be a useful tool to address concerns around distributing inheritances

Although everybody needs to have an estate plan, the Last Will and Testament may not be the only, or even the best, solution. For many people, the use of trusts can be an excellent planning tool.

The most common type of trust is a trust created in a Will, called a “testamentary trust.” For example, if a person has children under the age of 19, a trust must be created because minors cannot receive an inheritance before they are adults, explains Vernon lawyer Rob Culos, from Culos & Co. Law.

Even if a person’s children are adults, their Will usually provides that, in the event that one of their children should predecease them, leaving their own children (i.e. the grandchildren of the Will Maker) those grandchildren are usually young enough to need a trustee to receive, invest and pay out their inheritance. These types of testamentary trusts are quite simple and common.

However, other people have a more complex situation, and a trust is often the best answer. A trust that is designed to take effect immediately (called an “inter vivos trust”) can be a very effective way to plan the distribution of assets after death.

For example, some people have an adult child who struggles with challenges such as drug or alcohol addiction, homelessness or mental illness. Parents of these people still want to provide for their adult child, but it may be unwise to provide that person with easy access to money. A person who has money, but who is not used to dealing with it properly, can become a target. Also, for those persons with a drug or alcohol addiction, easy access to money can create unforeseen problems.

Another common situation where a trust can create the desired distribution while avoiding the pain and heartache of lawsuits, is where spouses have “his and her kids.”

Many people want to provide for their spouse after their death, but also want to leave something for their own children after the surviving spouse has passed away. One of the best solutions for that dilemma is to create an “Alter Ego Trust.”

An Alter Ego Trust allows persons aged 65 and over to transfer their major assets into the trust. The trust document, and not the Last Will and Testament, provides for the distribution of the assets after death. Although it is fairly easy for a disgruntled child (or spouse) to challenge a Will in court, it is much more difficult to challenge a trust.

To learn more about estate planning and trusts, contact Culos & Co. Law at 250-549-7168 in Vernon, or 250-546-2448 in Armstrong, or visit online.

Estate planning

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