Should I leave property in trust or not?
When you set up your estate plan, not only do you need to decide who you are leaving property to, but you also must decide how you are leaving it to them.
The simplest and most common way to leave property is outright, meaning you leave the property directly to the beneficiary in their own name. The beneficiary has complete ownership over the property and can go blow it all on a trip to Vegas if they’d like.
Alternatively, we may advise our clients to at least consider leaving property in trust. When property is left in trust, we can dictate how much or how little control the beneficiary has over the property.
For example, we may have a beneficiary with a gambling problem or with a disability and decide that we need somebody else to serve as trustee to manage the property for the beneficiary.
Even if we do not have specific concerns about a beneficiary’s ability to manage the assets themselves, there can be substantial benefits to leaving property in trust. First, property in trust for the beneficiary can have stronger asset protection in case the beneficiary is ever sued. Trust property may also be protected in a divorce proceeding. If your son gets divorced, we don’t want his now-ex-wife to end up with half of the family assets, and a trust can provide some protection on that front. Finally, if my son inherits his property in trust and it remains there for his entire life, then when he passes away, the trust property is not considered part of his estate for tax purposes.
At Montana Estate Lawyers, when we have beneficiaries whom we trust completely, but still want the protections of an inheritance in trust, we often recommend what we call “beneficiary-controlled trusts.” This is exactly what it sounds like – the beneficiary can be their own trustee and exercise substantial control over the trust. They can even decide to terminate the trust completely upon consulting with an attorney if they decide they don’t want to deal with it. But, they still get the legal protections described above.
The decisions on how we will leave property to our beneficiaries is unique based on each client’s circumstances, and our attorneys will always have a thorough discussion with you to make sure that your plan best suits the needs of your family.
