Do I Need a Trust if My Accounts Have Named Beneficiaries?
The primary goal of any estate plan is to guarantee that your assets are distributed to your beneficiaries according to your wishes. However, achieving that goal isn’t always a straight-forward process. Working with an experienced estate planning attorney will give you greater peace of mind, because you’ll know that your loved ones will be cared for as you planned.
If you have named beneficiaries of your accounts, that’s a great first step, but it isn’t always enough. If you don’t have a trust in place, your assets might not end up in the hands of those named on your accounts. Plus, there are additional benefits to having a trust that aren’t afforded by simply naming the beneficiaries of your accounts.
To answer the question, “Do you need a trust if you have beneficiaries?,” let’s take a closer look at what it means to name the beneficiaries of your accounts, and why it’s a good idea to create a trust to handle your assets.
Trust vs. Beneficiary: Do you need a trust if you have named beneficiaries on your accounts?
Yes. It is always a good idea to have a trust to handle your assets after your death. Naming the beneficiaries of your accounts ensures that they can avoid probate, but it overrides any estate planning you may have in place already. Additionally, there are limited ways in which you can distribute the money from your account by simply naming a beneficiary.
When you set up a revocable trust, you can either name the trust as the beneficiary of your accounts, or retitle the account to list the trust as a joint account owner. The trustee can then handle the distribution of your estate according to the guidelines set forth in the trust. This way your loved ones can avoid probate court, and you retain control over the account until your death.
Why shouldn’t I just name a beneficiary for my accounts?
Naming a beneficiary can be a good stop-gap measure to ensure that your assets don’t end up in probate court. However, it’s a very crude solution for a very complicated problem. Ideally, you probably want to have more control over how your assets are distributed. Simply handing all the money over to one person can leave them responsible for taxes and fees that they wouldn’t otherwise have to pay.
There are also a few special cases in which you really wouldn’t want your accounts to only have a named beneficiary. If your child is the pay-on-death beneficiary of your account, they’ll be given the entirety of the funds in your account once they turn 18. If that’s hundreds of thousands, or even millions of dollars, do you really want them to have control over all that money at such a young age?
If you’ve named a special needs beneficiary, they may no longer be eligible for government assistance once they inherit the entirety of your account. You’ll want to create a “special needs” trust and have the account funds pay into that trust when you pass on. This can help ensure that the assets from your estate are passed on, while your beneficiary maintains their ability to receive government aid.
Find out how Phelps LaClair can help you set up your estate plan.
There are infinite answers to the question, “why do I need a trust?” It’s always a good idea to have a detailed plan for your assets after you pass on, because your estate plan needs to work for you and your family. Creating a trust guarantees that your loved ones will be taken care of and minimizes the tax liability of beneficiaries of your estate. Phelps LaClair, has been serving families in the Gilbert area for over 40 years. Our top-notch estate planning attorneys can help you navigate one of life’s most complicated journeys. Call us today to find out how we can help you protect your loved ones and achieve financial peace of mind.