What is a Trust? Do I need a trust?

As Montana estate planning attorneys, we often receive questions about trusts and whether they are necessary for our clients’ specific needs. Trusts can be a valuable tool in estate planning, but they aren’t always necessary, especially for individuals with modest means. In this article and video, we will discuss what a trust is, the responsibilities it carries, and how we evaluate the need for a trust in your estate planning process. 

What is a Trust?

A trust is a legal fiction created to handle various assets for the person who established it. This person is known as the settlor. A trust essentially provides directions to the trustees named in the trust to manage the trust assets in a specific way. Trusts can be an effective way to protect assets, plan for the future, and provide for loved ones, but they may not be the right solution for everyone. 

Estate Tax Exemptions and the Need for a Trust

One reason trusts may not be necessary for many people is the federal estate tax exemption. This exemption allows an individual to pass on a certain amount of their estate to their heirs without incurring estate taxes. As of 2023, the federal estate tax exemption is $12.92 million for individuals and $25.84 million for married couples. These amounts are subject to change, and it is crucial to consult with an estate planning attorney to understand the current exemption levels. 

For those with estates below these thresholds, a trust might not be cost-effective or necessary, as estate planning goals can often be accomplished without the added expense of a trust. However, trusts can still offer advantages in specific situations, such as charitable giving or special needs planning. 

What Are The Responsibilities of a Trustee?

Establishing a trust carries significant responsibilities, particularly for the named trustee. The trustee has fiduciary responsibilities, meaning they must act in the best interest of the trust and its beneficiaries. This includes managing trust assets prudently, keeping accurate records, and distributing assets according to the trust’s terms. 

Trustees who fail to uphold their fiduciary responsibilities can face legal consequences, including litigation and personal liability. Therefore, it is crucial to choose a responsible and trustworthy individual or institution to serve as a trustee. 

Evaluating the Need for a Trust in Montana

At BKBH, we understand that every individual’s estate planning needs are unique. When we meet with clients, we carefully evaluate their specific situation to determine whether a trust is necessary and cost-effective. In some cases, a trust may be the best solution, particularly for those with larger estates, complex family situations, or unique planning goals. 

For instance, charitable trusts can be an excellent tool for those who wish to donate a portion of their estate to a charitable foundation at the end of their life. By establishing a charitable trust, you can support your chosen cause while potentially enjoying tax benefits. 

However, for many Montana residents, a trust may not be necessary. We work closely with our clients to develop customized estate planning strategies that meet their needs and goals without incurring the added expense and responsibility of a trust (if a trust is not advantageous). 

Trusts can be a valuable component of estate planning, but they are not always necessary, particularly for individuals with modest means. As experienced Montana estate planning attorneys, we can help you determine whether a trust is the right solution for your unique circumstances. We are committed to guiding you through the estate planning process, seeking to ensure your assets are protected and your wishes are carried out according to your goals. To learn more about trusts and estate planning in Montana, contact us today to schedule a consultation.