The estate tax is a hotly debated topic among politicians. Some people, generally Republican, say the estate tax should not exist because income tax, sales tax, property tax, and other taxes have already taken enough away from a person by the government. This same party argues that financially successful people should not be taxed again at death, but rather financially successful people should be able to pass their assets on to their family and friends. The other side, generally Democrat, argues the government provides the environment and tools that allowed someone to be successful, so the government should get a piece of the estate. This party believes the government can better allocate the resources from the estate than the deceased individual. Trust can be useful in planning around the estate tax, but with Republicans having majorities in both houses of congress and the presidency, there is talk of eliminating the estate tax entirely.

If the estate tax is repealed, is a trust still useful or necessary? Yes, trust are useful, helpful, and necessary in many situations beyond estate tax planning.

First, a quick definition of a trust: A trust is a legal document that allows a person or entity, a “trustee,” to hold legal title to property for the benefit and use of another

A trust is a legal document that allows a person or entity, a “trustee,” to hold legal title to property for the benefit and use of another person called a “beneficiary.”

Here are five reasons why a trust is still useful, helpful, or necessary, even if the estate tax is repealed:

Avoiding Probate: One of the biggest benefits of a trust is avoiding the probate process. Probate is the process of transferring assets to heirs, or beneficiaries after someone dies. It can be a time-consuming process, and costs can be high if instructions are not clear or if the will is contested. Even with small estates, beneficiaries may not have access to estate funds out until the will is filed with the probate court and a personal representative of the estate is appointed. A trust can give beneficiaries immediate access to trust funds. If you have property in multiple states, a trust can be especially beneficial in avoiding probate in all states. Also, probate makes your will a publicly viewable document, while trust assets provide for private distribution.

Control: A trust allows you to specifically describe what you want to happen with your assets, even after you die. You can also direct how funds in the trust can be used, or distributed over time in percentages, fractions, or another method, or how the use of trust assets can be restricted.

Incapacity Protection and Providing for a Child or Other Relative with Special Needs: A trust may also provide protection if you become incapacitated. In this circumstance, the trustee can manage trust finances, and work in conjunction with your agent under a financial power of attorney, without the need for a court appointed conservator or guardian. If you have a child or other relative with special needs, a trust is particularly important. A special needs trust allows a beneficiary with special needs to receive the benefits of inheritances, gifts, lawsuit settlements, or other funds without losing the individual’s eligibility for government programs that help support the individual.

Creditor Protection: A properly structured trust can ensure that creditors cannot reach trust funds. This can be helpful if a beneficiary divorces, is the target of a lawsuit, or just owes someone money.

To summarize, trusts are useful, helpful, and necessary as part of an estate plan. The listed reasons apply to you and your situation, even if the estate tax is repealed. Whether you love or hate the estate tax, Congress, the president, Republicans, or Democrats, using a trust can be right for you, no matter what the government does!

Now It’s Your Turn

What do you think of the estate tax? Are you concerned about the repeal, or rejoicing at the prospect of a repeal? Let me know in the comments section and we will have a conversation in the comments.

To know if a trust is right for you, and which type of trust is best for you, consult with an attorney. Schedule your free consultation online now.