Linda P. EricksonLinda P. Erickson, CFP®, is the president of Erickson Advisors and a registered principal offering securities through Cetera Advisor Networks, LLC, 336-274-9403 lindae@ericksonadvisors.net.
Have you attended a seminar recently where you were told that you need a trust? Does your neighbor (brother, co-worker) seem shocked that you don’t have a trust?
We should remember that the advice to adopt a trust (or not) should be made by a qualified attorney who knows your full financial and family situation. We are all unique and our Estate Planning needs are just as diverse. With these caveats in mind, let’s look at the most popular trust being advocated by attorneys and planners today.
The ‘Revocable Trust’ has been the subject of many senior seminars recently. This trust can serve as both a holding and a distribution vehicle for all of your assets not held in an IRA, a Retirement Plan or a similar vehicle. Those assets might be one or more of the following: bank accounts, money market funds, mutual fund accounts, brokerage accounts, rental properties and any property held out of state. It should not hold your home, your residence in North Carolina or any account which already has a beneficiary designation.
A trust can make things easy for those you love at the time of your death. Gathering all of these assets into one place provides your executor or executrix with just one non-beneficiary item to deal with upon your death. This sounds perfect. Why would anyone not want such a problem-solving document? You may not need a trust; you may have already created your most efficient estate plan.
If your assets are limited to the following:
- retirement plan, a pension, or an IRA,
- life insurance policy or an annuity,
- bank account or brokerage/mutual fund account to which you have added a ‘Transfer On Death’ beneficiary designation, there is little else to place into a trust. When an asset names a beneficiary, that asset passes outside of your will and any trust you may have written. If your will says that your son gets all of your assets, but your named IRA beneficiary is your ex-wife/husband, please remember that your ex-wife/husband will get the IRA asset.
To determine if you need that widely touted trust, do a quick inventory of your assets. Check for the number of assets listed that are not in the list above. If there are none, you probably don’t need a trust. If, on the other hand, there are assets not on the list, proceed to contact your attorney (this document should not be drafted home) and create a trust. At that point you are almost finished – but not quite done.
Drafting and signing a trust document is only half of the required two-step process. The second and equally important task is retitling all of those assets (again) not on the list above. You may need some help with the retitling process, and this is the time to ask for professional assistance to complete this process. Without it, the trust is just a piece of paper and will not serve as a finish to a near perfect estate plan.