Summary of "6 Top Reasons to Create a Trust"

Overview

The video discusses six primary reasons for creating trusts, focusing on estate planning rather than direct financial markets or investing strategies. However, the content is relevant for wealth management, asset protection, and tax planning within personal finance.

Key Finance-Related Points and Instruments

Trust Types Mentioned

Revocable Living Trust
Irrevocable Trust
Medicaid Asset Protection Trust
Protected Trusts (e.g., for surviving spouse and children)
Domestic Asset Protection Trusts (not available in Alabama during life)

Assets Involved

Real estate (houses, land)
Investment accounts
Other personal assets

Six Reasons to Create a Trust

1. Avoid Probate Court

Probate can take 6 months to a year or longer.
Probate costs approximately 5% of the estate value (e.g., $25,000 on a $500,000 estate).
Trusts allow private, court-free asset distribution on your own timeline.

2. Provide for and Protect Surviving Spouse and Children

Protect assets from risks related to surviving spouse’s potential remarriage or divorce.
Use irrevocable trusts with “HEMS” (Health, Education, Maintenance, Support) provisions to control distributions.

3. Manage Inheritance for Specific Beneficiaries

Protect minors or beneficiaries who may be financially irresponsible.
Stagger payments at ages such as 21, 25, and 30 to prevent lump-sum misuse.
Address special circumstances like beneficiaries with addictions or special needs.

4. Protect Assets from Long-Term Care Costs

Medicaid Asset Protection Trusts shield assets from Medicaid’s 5-year look-back rule.
Assets placed in trust for 5 or more years are exempt from Medicaid claims.

5. Avoid Estate Taxes

Move assets out of the taxable estate via trusts for beneficiaries.
Control payout timing and conditions without outright gifting during lifetime.

6. Protect Assets from Lawsuits

Alabama does not allow asset protection trusts during lifetime.
Post-death irrevocable trusts can protect assets from creditors, lawsuits, and ex-spouses.

Additional Notes

Probate court involvement is costly and time-consuming.
Trusts provide privacy and greater control over asset distribution.
Medicaid planning is crucial, given that approximately 70% of people turning 65 may need long-term care.
Trusts can be tailored to individual family circumstances and needs.

Disclaimers

The video is informational and based on the presenter’s legal practice. Viewers are encouraged to contact the presenter for personalized advice. No direct financial or investment advice is given.