“Trust”-Worthy | Financial Planning Chapel Hill l Old Peak Financial Advisors

Trusts have a reputation as a tool for billionaires only.  In fact, they can make sense for a lot of people of modest means.  I have personal experience.

My mother recently passed away.  Before she died, my parents set up a trust. Boy, am I thankful.  It’s not because there is a tax savings.  Under today’s tax laws, and with a bit of planning, you only owe estate taxes if you die with more than $5.25 million, or $10.5 million for a married couple.  Rather, the benefit of a trust is avoiding probate.

Probate is the court-administered process that’s legally required to pass assets – whether “things” or financial assets like investments or bank accounts – to your heirs.  You want to avoid it.  It’s a hassle for your heirs, especially if they live far away from you.  It will probably take 6-9 months or more to go through the court.  Legal challenges from unhappy relatives are easier in probate than with a trust.  Probate is also expensive.  In North Carolina, for example, it can be $6,000 in court costs plus lawyers’ fees.  You also lose privacy, as anyone can see what’s in your estate.

If you set up a trust before you pass away — the most common is a revocable living trust — you avoid all those disadvantages.

Admittedly, there are other ways to avoid probate.  Your surviving spouse will typically get most of your estate automatically.  Your IRA or 401(k) can pass to your beneficiaries outside probate, and so can some other kinds of accounts. But for a lot of people, without a trust, your survivors will end up in probate. Speak with an estate-planning attorney, or call me if you want to learn more. Your heirs will thank you for setting one up.  I thank my parents.

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