Not Just for Rockefellers


You don’t have to be super rich, or even just rich, to set up a trust to protect your assets for yourself or your loved ones. An attorney can help you establish a fairly straightforward trust for a fee in the range of $200 to $2,000, though more complex trusts can be expensive to set up.

Why bother? Because there may be advantages to having assets owned by a trust rather than owned by you as an individual. Although a well-drafted will probably serves the bequest needs of most people, trusts are an option worth exploring.

A great resource to help you get started is the National Association of Financial and Estate Planning (www.nafep.com). Also check out the Wills and Estate Planning resource at www.nolo.com. Here are some widely used trusts:

  • Revocable trust. As the name indicates, with this trust you have maximum flexibility. If you want, you can shift assets into it, cancel the arrangement, and take them back out. You control the trust fund and collect any investment income. The main advantage to this trust is probate avoidance. At your death, trust assets go directly to your heirs without a court overseeing the process. Also, you’re protected in case you become incapacitated. Someone you’ve named as a trustee will step in and manage the trust fund on your behalf.
  • Irrevocable trust. You can’t take out assets once they go into this type of trust. Your spouse, children, and other loved ones can be among the beneficiaries, so they can receive money from the trust fund. Trust assets also may be out of reach of your creditors.
  • IRA trust. When you have an IRA, you need to name a beneficiary. You may be concerned, though, that a large IRA will be mismanaged. “One solution is to name a trust as the beneficiary of your IRA,” says Ed Slott, a CPA in Rockville Centre, New York, who publishes Ed Slott’s IRA Advisor newsletter. “Then the person whom you’d like to inherit the IRA can be the trust beneficiary.” But take caution: Such a trust must be structured carefully, Slott says. If the trust is drafted properly, IRA distributions can be stretched out over the beneficiary’s life expectancy, deferring income tax and generating considerably more wealth.
  • Family, or Credit Shelter, trust This type of trust is commonly used by married couples. The first spouse to die leaves assets to the trust; the amount can be as much as the federal estate tax exemption allows, which is $2 million in 2008. Beneficiaries may include the surviving spouse and the couple’s children. This trust is also called a bypass trust because estate tax is bypassed altogether. At the death of the first spouse, the bequest is sheltered by the estate tax exemption. The trust assets may not be included in the survivor’s estate so they won’t be taxed at the death of the second spouse either.
  • Marital trust. After the first spouse’s death, assets

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