Trusts are commonly used in estate plans to leave assets to minor children, incapacitated beneficiaries, or spendthrifts. To avoid the expense of guardianship for a minor, a trust is a necessary part of the estate plan for that beneficiary. Trusts are used for young adults because although the legal age of majority in Texas is 18, I have yet to meet a parent who agrees with that definition! So, trusts are often extended until 25 or 30.
But what if your beneficiary is healthy, financially stable, and manages their money well? Shouldn’t you just give these beneficiaries their money? As for me, I want any gifts I receive in a trust.
At Pyke & Associates, we usually recommend a trust for the estate beneficiaries, because we can create the trust to protect the assets from many of life’s uncertainties. Most notably, a well-drafted trust can protect assets from creditors, from division in divorce, or seizure by the government to pay for medical expenses otherwise covered by Medicaid. An individual cannot create a trust for themselves that does these things, so we cannot leave the money directly to the beneficiaries and simply allow them to create a trust for themselves, waiting to see if negative situations arise. While it is always desirable to create a trust for those with serious medical issues or spendthrifts, we never know what the future holds. Our crystal balls are no better than yours. Planning is about anticipating what might happen.
At Pyke & Associates, we encourage planning that protects assets from medical emergencies, divorce, lawsuits, or other potential adverse actions for our beneficiaries. Life throws too many curveballs to assume that everything will work out well for your beneficiaries. Estate planning should be for the long term, and in the long term, almost anything can happen. If your will has a standard trust for minor children that terminate when they are 25, we highly recommend that you review and modify your estate plan.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.
