• Greg Christiansen

I Have a Will, Is that Enough? Part II – Trusts for Small Estates

In January this year, I wrote a blog about whether a will is sufficient to cover your estate planning needs.  Since the publication of my earlier blog several clients have raised the question as to whether a Trust is necessary if they have a small estate. The simple answer is Yes!


There are two basic purposes for including a Trust in an Estate Plan.  As explained in my earlier post, the first benefit of incorporating a Trust in an Estate Plan is to avoid the cost and expense of probate.  We will all have the opportunity to witness how expensive a probate case over the next year in the administration of Prince’s estate.  Because I have already addressed that issue, let me focus on the second purpose, avoiding conservator-ship.  While a Last Will & Testament will allow individuals to appoint guardians for their minor children they fail in most cases to provide a remedy if the trustee loses the ability to care for him or herself.


A Trust, on the other hand, can competently address this issue.  In most cases, an incapacity clause is placed in the Trust with an alternative trustee or the appointment of a conservator.  Without this clause individuals are required to go to court to have a conservator appointed.  In many cases, the cost of doing so will exceed that of probate.


In addition to the two basic purposes there are other benefits for utilizing a Trust in an estate plan.  One such benefit is the ability to provide some asset protection for your beneficiaries.  Generally, there is limited asset protection for the initial Trustees of a Trust (You).  However, there is great asset protection for your beneficiaries.  For example, you leave $100,000 for the benefit of your son, however, the $100,000 must remain in the trust until he reaches the age of 30.  At 20, your son is loses a lawsuit and is not liable for $50,000. The individual holding that judgement cannot enforce the judgement against the trust.


From time to time, I also have clients who ask if it is better to hold property as joint tenants (co-ownership) with their beneficiaries instead of a Trust.  The problem with this scenario is asset values will fluctuate.  Meaning the intended value of the asset may significantly increase or decrease from what you intend.  Also, if you place an asset, such as a home, in joint tenancy with your beneficiaries, any creditor of that beneficiary may attempt to satisfy an obligation with that asset.   Lastly, if you name a joint tenant, and the beneficiary dies before you do, the asset will go through probate, something you would have avoided with a Trust.   This exposure is not limited to real property but could effect other assets such as life insurance policies, brokerage accounts, retirement accounts, and annuities.

Yes, there is a benefit of having a Trust in a small estate!