Page 5 - JanuaryFebruary25 CBA Report

Some Hidden Benefits
of Creating a
Trust
By Christina Clowers Flanagan
There is a misconception that people who do not have estate
tax concerns do not need a trust. With the 2025 unified
credit set at $13.99M per individual ($27.98M per married
couple) very few people are affected by the estate tax. Even if the
unified credit “sunsets” at the end of this year as scheduled under
the Tax Cuts & Jobs Act of 2017, the unified credit will be approx-
imately $7M per individual ($14M per married couple),1 so estate
taxes still will not be a concern for most people. Does it follow that
most people do not need a trust? No.
Revocable trusts can help clients achieve any number of
planning goals. Also, with a surviving spouse’s ability to elect
portability of the unused unified credit of the first spouse to die,
even couples with potential estate tax concerns can use a joint
trust so their assets act in the same way as they did prior to the
creation of the trust,2 which many clients prefer. Following are
some common scenarios where incorporating a revocable trust
can benefit your clients.
Families with Minor Children
Many parents with young children think their assets are not
sufficient to require trust planning. While young families might
not yet have accumulated a lot of wealth, what they frequently do
have is life insurance that is intended to pay off their mortgage and
to help raise their children if a spouse dies. If something happens
to both parents, this can result in a large asset (the house) and a
lot of insurance proceeds passing to minor children.
I frequently see couples with young children opt for testamen-
tary trusts, thinking it is less expensive than creating an inter
vivos trust. Assuming that is true (which I doubt), it will be far
more costly to administer a testamentary trust due to the court’s
involvement. Worse, the will may not include a testamentary trust
or other important provisions like the power to sell real estate or
authority to distribute to an Ohio Transfer to Minors Account.3
By incorporating an inter vivos trust into their estate plan, a
couple with minor children can control the age(s) that their chil-
dren will receive their inheritance. They can also craft special
provisions allowing the Trustee to offset expenses that a guardian
of the person will incur for raising their children to the age of
majority. Under R.C. 5801.04(C), the parents can designate a
“beneficiary surrogate” to receive trustee reports on behalf of
the children, which provides oversight and accountability of the
trustee and prevents the children from learning the extent of their
inheritance until they are more mature.
Blended Families
Spouses who have children from prior relationships have
unique planning needs. Often, they want to provide for their
spouse but also ensure that their assets ultimately pass to their
own children. Separate trusts for the spouses facilitate these
goals. The trusts can provide for the Trustee to distribute income
and principal to the surviving spouse for the surviving spouse’s
maintenance and support. The distributions can be limited to an
THE REPORT | January/February 2025 | CincyBar.org 5