You may assume that in the field of estate planning, there is a document called a trust, and there is a document called a last will. Our Mount Clemens estate planning attorneys often speak with clients that are working with this assumption at first. In fact, there are a number of different types of trusts, and there are also multiple types of wills.
If you decide to use a trust, the best course of action will depend upon the circumstances. For people with relatively simple and straightforward objectives, a revocable living trust can often be the ideal choice.
Many individuals are under the impression that you lose control of assets that you convey into any type of trust. This can be a source of concern if you want to be able to access the funds if your financial situation changes. With a revocable living trust, this is not a factor, because you can revoke or dissolve the trust at any time. You could then walk away with the assets that were in the trust, and the trust would no longer exist.
The power of revocation is not the only level of control that you retain when you establish a revocable living trust. A trust creator is called the grantor of the trust; the trust administrator is the trustee; and the person who can receive monetary distributions from the trust is called the beneficiary. The grantor of a revocable living trust will typically act as the trustee and the beneficiary during his or her life, so the control is there even when the trust is intact.
One benefit that you gain if you use a living trust is the ability to account for the possibility of incapacity. When you consider end-of-life eventualities practically, you will recognize the fact that many people become unable to handle their own affairs before they pass away. You can account for this if you have a living trust. A disability trustee could be empowered to handle the trust administration tasks in the event of your incapacitation.
Another major benefit is the ability to leave instructions that the trustee would be compelled to follow regarding the way that you want the assets to be distributed to the beneficiaries. For example, if you have income producing assets in the trust, you may want the trustee to distribute the earnings from the trust to the beneficiaries on an incremental basis. In this manner, the viability of the trust would be extended.
Incidents of Ownership
In a legal sense, you retain incidents of ownership when you establish a revocable living trust, because you control the trust in every way. This can be a positive for some people, but for others, the retention of incidents of ownership would not be a good thing.
For example, some people are exposed to estate taxes. There is a federal estate tax that is applicable on transfers that exceed $11.2 million in value in 2018. Assets in a living trust would be part of your estate for tax purposes, but you could use an irrevocable wealth preservation trust to gain estate tax efficiency. You surrender incidents of ownership when you establish an irrevocable trust.
Asset protection can be a concern for people who are vulnerable to lawsuits. You could seek asset protection for your own purposes, but you may also want to protect assets that you are leaving to a loved one. There are irrevocable asset protection trusts that can be used under these circumstances.
Medicaid is a government program that will pay for long-term care. Most seniors will need it, and Medicare does not pay for living assistance. Medicaid is a need-based program, so you cannot qualify if you have significant assets in your own name. To qualify for Medicaid, you could convey assets into an irrevocable Medicaid trust.
Download Our Free Worksheet Right Now!
As you can see, there are many tools in the estate planning toolkit. A trust of some kind can be utilized to satisfy a number of different respective objectives. The best choice will depend upon the circumstances.
If you would like to obtain more detailed information about trusts and gain additional insight into the estate planning process, our Mount Clemens estate planning attorneys have developed the ideal resource for you. We have designed an estate planning worksheet that is very useful, and it is being offered free of charge at the present time. To get your copy, click this link and fill in the form on the right side of the page.