April 2006
Volume 2, Number 3
Table of Contents

What Can a Client Do With a Trust?

By Daniel J. Hoffheimer

Introduction

In counseling clients in estate planning, the lawyer is often called upon to answer many questions clients pose about trusts. A client is often predisposed against them and to ask only for a “simple will.” (There is no such thing!) Here is a checklist of most of the major accomplishments a trust can perform and that a so-called “simple will” ordinarily cannot do. This list may help the lawyer in counseling a client, or it may serve as a handout for the client to take and consider.

Summary of Trust Purposes

A trust can include many different provisions to accommodate one or more of these objectives, among others:

  • Provide a structured way to administer your personal and financial affairs during your life, especially if you become incapacitated.
  • Carry out your choice of trustees and successor trustees to administer your trust.
  • Provide a protected way to administer your assets for a surviving spouse, and in a tax-advantaged manner and to protect the assets upon a remarriage.
  • Ensure the orderly and private transfer of your property after your death, and after the death or your surviving spouse.
  • Protect and manage assets for the benefit of, and provide support for, your children, grandchildren, and other beneficiaries until they reach the ages or meet conditions that you determine for distribution.
  • Create incentives for desirable behavior and accomplishments by your beneficiaries—or disincentives for undesirable behavior.
  • Ensure the transfer of property in a way that takes advantage of the available federal and state tax exemptions.
  • Provide for the support of an elderly surviving spouse, parent, disabled child, or other person with protection from Medicaid disqualification or reimbursement.
  • Pay for a loved one’s education.
  • Pay for a loved one’s health and medical care.
  • Avoid probate costs and inconvenience.
  • Make tax-advantaged gifts to children or others.
  • Make tax-advantaged generation-skipping gifts to grandchildren.
  • Protect assets from a beneficiary’s creditor’s claims or from a divorcing spouse of a beneficiary.
  • Protect assets from claims of a beneficiary’s present, former, or future spouse, including in a divorce.
  • Minimize the risk of competition or disagreement among beneficiaries over financial matters.
  • Arrange for the cooperative sharing of family assets such as a residence or vacation home.
  • Determine the method for decisions regarding stock options and other unusual assets, such as in a family business.
  • Make tax-advantaged charitable gifts.
  • Arrange for the management and distribution of retirement plans and life insurance proceeds.
  • Provide for the continuation of alimony, property division, or child support payments, if necessary, but no more than is legally required.
  • Arrange for the management or sale of a family business or save a family business from an untimely liquidation or disadvantageous sale.
  • Reduce your gift tax, estate tax, generation-skipping tax, and income tax..

One can modify the terms of a revocable living trust, change beneficiaries, or terminate the trust as one’s goals change. One can draft the trust to cease and pay out immediately following death or to have it continue into the future for one’s beneficiaries. The flexibility of a trust makes it ideal for a wide range of individuals and purposes when a will alone cannot accomplish the client’s goals.

Daniel J. Hoffheimer is an attorney for Taft, Stettinius & Hollister LLP in Cincinnati, Ohio.

 

Copr. (C) 2006 West, a Thomson business. No claim to orig. U.S. govt. works. This article is reprinted with permission from West, a primary sponsor of the General Practice, Solo and Small Firm Division.

 

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