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Written by Kelly S. Olson Pedersen, CFP®, CDFA

Many people think a trust is something for rich people only.  While the word “trust” may sound fancy and like something you may not need, we like to let clients know what a revocable trust can do for them and their families.

What happens to your assets after you die?

First, we have to remind ourselves what ‘probate’ is.  If you die with only a will and your assets are titled in your name only, those particular assets (like a bank account or an investment account in your name) will pass to your loved ones via your will.   To enforce your will, your loved ones will need to call an attorney to take your will to a judge to prove to the court what should happen to your accounts. This process is called “Probate.”    Probate can get a little expensive because of the court time and attorneys involved. It is a relatively easy process to avoid by simply titling your assets correctly and/or using a “revocable trust.”   Think of a revocable trust as a really long and detailed beneficiary form.  It is simply a document that spells out EXACTLY how you want all of your assets to pass along after your death. The best part is, your loved ones don’t have to go through probate and drag an attorney to court to prove anything to a judge! The document of the trust is proof enough.

Benefits of a trust

Another benefit of using a trust is that since you aren’t going through probate, where everything is a matter of public record, your asset transfer is kept private!  This is a great thing for business owners who want to keep the price of their company confidential so that someone can’t under-bid for the shares, etc.   Sometimes, it is just none of their business!  Probate can also take a fair amount of time, which can be quite a hindrance to a company if it is held up by a court proceeding.

The trust is a very clean way to designate how a pool of assets can be distributed, say to your children, and also name trustees to take care of the assets until the kids are old enough to do it themselves.  All of the details can be written in the trust and you don’t have to go to court to enact any of it!   Plus, as a rule of thumb, a revocable trust is less easily contestable than a will. If long-lost-cousin-Eddie shows up at the probate court hearing, he may want a piece of the pie.  A revocable trust is a bit harder to contest.

So when should you think about adding revocable trusts to your estate plan? 

If you have any of the following concerns:

  • You do not want your loved ones to spend the time and money with your assets caught up in probate.
  • You own shares of a business that need to flow swiftly to the heir…. And privately.
  • You have a higher net worth that would indicate for additional estate planning to fully utilize all of the tax exemptions that are available to you (you don’t want to miss them!!)
  • You have a split family with stepchildren, etc.   It is best to spell out in a very detailed fashion what your wishes are and how to manage your stuff when you are gone. Leaving less to chance and infighting.
  • You own real estate in another state. This saves a SECOND probate… potentially.
  • You have assets you want to protect from your surviving spouse’s future spouse/family.  You can designate some assets to be used by your spouse but that your spouse cannot change the beneficiary on it after their death. This ensures that the asset passes to the person YOU designated.

If you have any of these considerations, feel free to give us a call and we will help you understand the situation better so you can address them with your attorney.

Caissa Wealth Strategies is a fee based registered investment advisory firm, specializing in personal, dynamic wealth management. Based in Bloomington, Minnesota, Caissa financial planning professionals provide individualized strategies for every client. You can expect more from CAISSA, and in turn, you will get a fiercely loyal advocate on your side. For more news and information on wealth management solutions, visit Caissa Wealth.