Do you need a trust?

When it comes to estate planning, many people think only of a will. They're seldom right. In addition to a will, a power of attorney, a living will, and a health care proxy are all important considerations. In addition, a will is just the tip of the iceberg for what will be necessary to ensure that assets pass smoothly and at minimal expense and trouble to the next generation.

A revocable living trust is one of the most common and flexible trusts available to those people who would like to lessen the impact of the probate process. Such trusts are also quite useful in the case of step-families. A revocable living trust can be arranged so that assets ultimately meant for the children of one spouse can be made available (in part or in whole) during the lifetime of the surviving spouse but then, upon the survivor's death, pass on to the children of the first spouse.

An irrevocable life insurance trust (ILIT) is a much more specific trust relevant to a much narrower group of people. Primarily meant to help avoid the estate tax, an ILIT is a useful vehicle to accomplish that goal. However, the rules governing ILITs and all trusts are complicated. Furthermore, since trusts are legal documents, counsel with a competent estate planning attorney is necessary.

As with your investments, your estate planning needs should be periodically reviewed. If not for you, then for your heirs: make sure the plans you have in place are those you feel most comfortable with.