Myth #3: Trusts are Only Useful After Death

Myth: Trusts are only relevant or useful after a person dies, functioning solely as tools to distribute assets like a will. Many people assume that the primary, if not the only, purpose of a trust is to avoid probate and manage inheritance for beneficiaries.

Movies:

1. The Ultimate Gift (2006) – A billionaire leaves his grandson an inheritance structured through a trust, but only if he completes a series of life lessons. The trust only activates after the billionaire’s death.
2. The Descendants (2011) – The central plot revolves around a family trust that controls a vast Hawaiian land inheritance. The trust exists because of the death of an ancestor.

TV Shows:

1. Succession (2018–2023) – Logan Roy’s death triggers chaos over his estate. While much of the battle is over corporate control, the show suggests that trusts come into play after death, as legal documents and succession plans are only examined once Logan is gone.
2. Gossip Girl (2007–2012) – Various characters have access to trust funds set up by deceased relatives, reinforcing the idea that trusts become relevant after someone dies.
3. Billions (2016–2023) – Although the show focuses on financial power plays, there are references to trusts being used after someone’s death to protect wealth.

Sources: Why the Myth Exists?

1. Confusion with Wills: Trusts are often compared to wills because both deal with the distribution of assets after death. This comparison leads people to believe that trusts serve no purpose until the grantor (the person who creates the trust) passes away.
2. Limited Public Understanding of Trust Functions: Trusts can be complex, and their various uses are not commonly discussed outside of legal and financial circles. The focus tends to be on avoiding probate, overshadowing other benefits like asset protection, incapacity planning, and tax management.
3. Estate Planning Marketing: Some estate planning materials emphasize the post-death benefits of trusts, especially when comparing them to probate processes. This focus can inadvertently reinforce the idea that trusts are only relevant after death.
4. Media Portrayals: In movies and TV shows, trusts are often depicted in the context of inheritance disputes or family drama following a character’s death, rather than showcasing their lifetime benefits.

Reality: Trusts offer significant advantages during a person’s lifetime, providing flexibility, control, and protection that go far beyond post-mortem asset distribution.

1. Incapacity Planning: A revocable living trust allows for smooth financial management if the grantor becomes incapacitated due to illness, injury, or cognitive decline. Avoids Conservatorship/Guardianship Proceedings: Unlike powers of attorney, which can be limited and more likely challenged, a trust avoids the need for court-appointed guardianship because the successor trustee can immediately step in to manage the trust assets.
2. Asset Protection: Irrevocable Trusts can provide protection from creditors, lawsuits, and legal judgments, as the assets are no longer considered part of the grantor’s personal estate.
3. Control Over Asset Management: Trusts allow the grantor to set specific rules for how assets are managed, invested, and distributed during their lifetime and after death. Useful for individuals with complex financial situations, business ownership, or significant investments.
4. Tax Planning: Certain types of trusts, such as grantor retained annuity trusts (GRATs), charitable remainder trusts (CRTs), and irrevocable life insurance trusts (ILITs), offer strategies for reducing estate, gift, and income taxes.
5. Family Wealth Management: Trusts can be used to manage wealth across generations, ensuring assets are preserved and distributed according to the grantor’s wishes.
6. Real Estate and Business Planning: Trusts are valuable for managing real estate holdings, especially if the property is in multiple states (avoiding ancillary probate). Business succession planning can also be managed effectively through trusts.
7. Public Benefits Eligibility:

• • Medicaid Planning: Certain trusts can help protect assets while allowing eligibility for Medicaid or other government benefits.
  • Special needs planning.  SNTs provide for disabled beneficiaries without jeopardizing their eligibility for government benefits.