Most clients have heard the term “trust”, and many believe they need one. Trusts are
excellent estate planning devices, but not everyone needs a trust. Whether you need a trust
depends on what you want to do, and whether a trust will help you to accomplish that goal.
Simply having a trust is not sufficient. If you are going to invest in a trust then you must be
prepared to fund that trust and to keep it funded, or else your purposes may be frustrated.
If you have a modest estate and wish to simply give whatever is left over from your estate to
your competent, adult children, in equal shares, simple wills with durable powers of attorney will
generally suffice. It is our experience that simple wills are sufficient for most of our clients and
that we would be over selling to them if we recommended a trust.
If your estate is more substantial and your needs or desires are more complex, you may need
to establish a trust in order to achieve your goals. To make this decision, whether you need a
trust, you must first understand what a trust is and what a trust is about.
In its simplest terms, a trust is an agreement between you, and whomever you appoint as your
trustee, to manage whatever property you transfer to your trustee. The trustee has a fiduciary
duty to manage your property according to the terms of your agreement.
In a broader sense a trust is a breaking up of the incidents of ownership of the property you
transfer to your trustee. Incidents of ownership are the bundle of rights and responsibilities you
control when you own something.
In our discussions with our clients we usually hold up our pen and we tell the client that this is
our pen. What does that mean, exactly? It means that we hold title to the pen, or that people
generally regard the pen as belonging to us. It means we have a right to use the pen, or we can
give it to someone else to use for a period of time. For that matter we can give it to someone
else to use, and collect a sum for that use. Alternatively we can direct that this sum be paid to
someone else. We can leave the pen to someone via our will, or we can direct that someone
else may decide who gets the pen after our death.
These are all incidents of ownership, and there are more. The first incident of ownership you
give to your trustee is the bare title to the property. Since the property is no longer yours,
theoretically, it does not pass through your probate estate. Rather it will pass by operation of
your trust agreement.
You can break up these incidents of ownership in many complex ways to help achieve your
trust goals. While it may not sound powerful, a trust is in fact a tremendously powerful tool for
you to use if you need the trust. Some examples of powerful uses of trusts will be provided in