• The Gentreo Team

At What Point is My Estate Large Enough for a Trust?

Many families should be considering a trust as loved ones age


What is a Trust

A “trust” is a legal entity that a person establishes to hold and maintain his or her assets. Once a trust is created, and assets are placed inside the trust, a person called a “trustee” manages the assets. The individual establishing the trust selects the trustee. The trustee and type of trust decides how the assets are invested and how and to whom and when the assets are distributed when the owner of the trust dies. An “irrevocable trust” is a trust that once created you cannot move the money or change the beneficiary. The benefit of this is that it will most likely not be considered part of your taxable estate and heirs can gain quicker access to these funds.


Why Might One Want or Not Want a Trust

Many people might need to create a trust in order to adequately protect their estates so as to make sure that estate lives on beyond that person. In some instances, a trust might be a good idea, but in other instances, a Last Will and Testament might be sufficient. This is why having a tool like Gentreo is so important so as to understand and implement options as chosen and as situations might warrant.


One of the primary reasons people create trusts is to avoid having assets pass through the court process known as “probate”. “Probate" is the process of having the court validate one’s will and then authorizing one’s executor to distribute the estate to beneficiaries as instructed and pay taxes possibly owed.


When assets are placed into a trust these assets are in general not required to be probated. Assets in trust avoid probate because technically the maker of the trust no longer owns the assets. The trustee, the person elected to administer the trust, is the actual owner and is holding them for the beneficiaries. When the trust maker dies, the trust does not die with him or her since the trust is a separate entity and thus lives on.


However, not everyone needs to place their assets into a trust. This is because their estate is not large enough to worry about avoiding probate. Each state has different rules concerning the threshold amount that triggers probate. If your estate is valued at less than the threshold amount there are simplified probate procedures and thus, no need to set up a trust to avoid probate. For example, in California, estates valued at less than $150,000 can qualify for an exemption from standard probate procedure. In other states, the threshold hold is $100,000. Find out more about the threshold for your state on Gentreo.

An Important Exception

Additionally, if your estate is going to a spouse, it might be unnecessary to establish a trust since the entire estate will most likely pass directly to one’s spouse. However, a very important exception is in cases where one spouse may need significant amounts of care, which is quite costly, it might make sense to create a trust. For instance, if one spouse requires nursing home care, one probably would want a trust so as to make sure as to not have work the estate down to about $8,000 before Medicaid steps in to help with expenses, and even after death, the family house may go to the state and not to heirs such as children if a trust is not used and money is owed to Medicaid to cover costs of care.


Another option is to also remove a number of assets from probate by making certain bank accounts payable on death or having other assets like an insurance policy pass directly to a beneficiary upon your death. This action takes those assets out of probate and reduces the value of your estate. Again, look to Gentreo for tools and help in choosing what might be best for you and your loved ones.


Summary

Trusts are an important and legal method for protecting assets after you die or if you or your spouse need great amounts of care. Learn more by visiting Gentreo.


Gentreo is not a law firm or a substitute for a law firm or attorney or an attorney’s advice or recommendations. 


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