The revocable living trust is the most commonly utilized trust in the field of estate planning. People are comforted by the fact that you can in fact revoke the trust if you ever want to change your mind and take back direct possession of the resources for some reason. Plus, the control does not stop there. If you establish a living trust, you can act as the trustee and the beneficiary while you are alive, so you call the shots in every way.
A living trust is a better option than a last will for most people with a reasonable store of resources for a number of different reasons. One of them is the fact that you can account for incapacity. As we have stated, you would be the trustee of the living trust. You could name a disability trustee to administer the trust if you ever become unable to make sound decisions on your own.
Another living trust benefit is the ability to include spendthrift protections. You are not required to allow for lump sum distributions to the inheritors. This would be the case if you use a last will to state your final wishes. In the trust declaration, you could instruct the trustee that will succeed you to distribute limited assets to a spendthrift beneficiary over an extended period of time.
Perhaps the most important benefit that is realized through the utilization of a revocable living trust is the avoidance of probate. This legal process is costly and time-consuming, and privacy is lost, because anyone that is interested can obtain probate records to find out how you distributed your resources.
Incidents of Ownership
On the one hand, it is great to be able to maintain control of the assets in the trust. However, it is not always a good thing depending on your objectives. When you have a living trust, you maintain incidents of ownership in a legal sense, because you can in fact use the assets any way that you want to at any time. Because of this, they are looked upon as your own direct personal property.
As a result, if you are the target of a lawsuit, assets in the trust would be in play. If you are concerned about future legal actions, you could choose to convey resources into a self-settled asset protection trust. These devices are not legally available here in Michigan, but you may be able to establish this type of trust in another state. Generally speaking, resources that are held by the trust would not be available to litigants seeking redress in the future.
A lot of senior citizens ultimately require nursing home care toward the end of their lives. You may assume that Medicare will pay for a stay in a nursing home, but this is not the case. It will pay for convalescent care after an injury or illness, but it will not pay for custodial care.
Nursing homes in the Detroit area cost over $100,000 a year on average. You can multiply this by two for a married couple. An extended stay can consume a great deal of money that you intended to leave to your loved ones.
Many people obtain Medicaid eligibility to preserve resources, because this program will pay for long-term care. Since it is a need-based program, there is a low asset limit of $2000. Resources that are held by a revocable living trust would be counted if you were to apply for Medicaid to pay for long-term care.
There is a different type of trust called an income-only Medicaid trust. This would be an irrevocable trust, so you would not be allowed to touch the principal. Until and unless you apply for Medicaid, you could continue to receive distributions of the trust’s earnings. If you were to apply for Medicaid at some point in time, the assets that are in the trust would not be counted.
Learn More About Estate Planning!
These are a couple of different scenarios that would call for the creation of an irrevocable trust, but there are a number of others. If you would like to obtain more detailed information about this and other important estate planning topics, we would be more than glad to assist you.
Our Mount Clemens living trust attorneys are holding a series of seminars over the coming weeks and months. These information sessions are carefully prepared to cover many different topics in a fully understandable manner. There is no admission charge, but we do ask that you register in advance, because these sessions fill up quickly. To get all the details, visit our seminar schedule page.