People often think there’s an asset threshold that determines whether or not one should have a revocable living trust.

I don’t think that’s true, though.

What is “a lot” to one person might not be to another, so to try to place a number on when one should create a trust is imprecise.

There is an easy way to tell if you need a trust though – just think about whether or not you need to do one of these two things.

If you do, you need a trust (also, there’s a quick bonus third reason at the end).

1. You want to avoid probate.

A revocable living trust isn’t the only way to avoid probate, but it’s a great tool if the circumstances dictate it.

Those circumstances are often: real estate in different states; business ownership interests; private stock holdings; etc.

The way a revocable trust works is, once you create it, it becomes kind of it’s own “thing.” You can put stuff in it and the trust will own it while you’re alive, and after.

Because the trust owns the property, there’s no need to go through probate and change the ownership when you die.

2. You want to keep from spoiling your children.

This isn’t precisely the reason to use a trust – I’m being a little playful.

If, however, you want long-term oversight and management of your assets (usually for your young children), a trust is the only way to do that.

With a trust you have the ability to put someone in charge of distributing assets to your heirs AND creating the distribution schedule.

For example, if you have minor children you could say, “until they turn 25, distributions are discretionary for health, support, education, and maintenance; at 25 they can access a third just by asking; at 30 they can access 2/3, and at 35 they can have open access to all assets.”

It provides a little structure, as opposed to getting a big check on your 18th birthday.

That’s it.

You want that 3rd bonus reason?

Estate Taxes.

If you are married and your net worth is over $4m (the estate tax starts at $3m) you’ll seriously want to consider a revocable trust to increase your estate tax exemption from $3m to $6m.

I’m not going to go into detail today on how that happens, just know it’s possible.

Hope that helps!

Sincerely,

Christopher Small
Owner
CMS Law Firm LLC

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