It’s really not surprising to see just how many families believe that living trusts have no place in their estate planning strategies. Trusts were originally reserved primarily for the wealthiest of individuals and their families, and that old dynamic has had a lasting impact on the way many of today’s families continue to view them. Unfortunately, that misconception is preventing many people from receiving the living trust benefits they might otherwise enjoy – and making it even more difficult for many families to achieve their estate planning goals. It’s more important than ever that people learn just how these trusts can actually strengthen most estate plans.
Before examining how trusts can work to strengthen your estate planning strategy, it is important to dispel one common myth about these tools. Contrary to what most people seem to believe, a living trust is not something that only the rich can utilize to their benefit. The fact is that trusts can be a beneficial part of almost anyone’s estate plan, and can offer a whole host of flexible benefits that cannot be achieved through the use of a Last Will and Testament alone.
Trusts Need Not Be Overly Complex
At its core, the living trust is a legal relationship that enables you to transfer ownership of assets to a separate legal entity. That trust and the assets it holds are then overseen by a trustee, who is charged with protecting and managing the trust for the benefit of its named beneficiaries. There are different kinds of trusts, of course, and you can create yours to be either revocable or irrevocable, depending on the goals you are trying to achieve.
Revocable living trusts can be useful for ensuring that you maintain control over the assets in the trust while you are still alive. You can realize that benefit by creating the trust and then naming yourself as trustee. You then designate another person to be the successor trustee, charged with taking over management of the trust when you die. This type of trust can be revoked or amended by you for any reason and at any time prior to your death, so it can be a useful way to ensure that your living trust continues to be relevant to your needs even as your life circumstances change and evolve over time.
If, on the other hand, you have planning needs that require you to totally divest yourself of control over those assets, you should consider an irrevocable trust. This type of trust can only be revoked with great difficulty, but it can be useful when you are engaged in long-term care planning or want to take advantage of certain tax benefits.
The Benefits of a Living Trust
When you want to create the strongest estate plan possible, it is important to keep these living trust benefits in mind. As you’ll see, the flexibility provided by this legal tool can help you to achieve many different goals:
- With a living trust, you can provide for a more structured distribution of your assets over time. That can help to ensure that minor children, heirs with special needs, and beneficiaries who might have spendthrift tendencies have ongoing access to monetary assistance.
- Trusts can provide you with security against incapacitation, since your successor trustee will take over financial management of the trust assets in the event something happens to you. That can provide you with important peace of mind, and keep those assets from being overseen by a court-appointed guardian.
- Trusts provide for a faster distribution of assets, and can help your estate to avoid the months-long process involved in probate proceedings. That can get needed wealth into the hands of your loved ones in rapid fashion – which is something they’ll likely need if you were the primary source of income for the family.
- You can create what is known as a “pour-over” provision in your will that ensures that any assets you own outside of the trust get placed into the trust when you die. You can even assign your life insurance and pension benefits to your trust by making it the beneficiary of your policies and plans. That centralization of assets can simplify the distribution process.
- Trusts enable you to avoid probate – and that’s a major benefit for anyone who wants to avoid the time-consuming and costly process of having a court-supervised executor deal with the settling of your estate. Since probate costs can rise with larger estates, this can be a particularly useful benefit if you want to ensure that your heirs receive the largest inheritance possible.
- You can even use a trust to plan for Medicaid eligibility – though the trust needs to be irrevocable to accomplish that objective. Because your assets would be beyond your reach, Medicaid won’t count them when calculating your wealth and income to determine benefit eligibility.
Don’t Forget to Fund It!
Of course, there is one key aspect of a living trust that you cannot forget if you want to realize these benefits: the trust must be funded to be useful. That means that assets have to be properly transferred to the trust in order for it to accomplish your goals. The process of properly funding a trust can be complex, and titling mistakes can be costly. As a result, it is wise to consult with a competent estate planning attorney at every stage of the trust creation and funding process to ensure that your trust is designed and funded in a way that can best accomplish all of your goals.
At Frank & Kraft, Attorneys at Law, our experienced estate planning team can help to ensure that you receive the assistance you need to create living trusts that will strengthen your estate planning strategy. We’ll work with you at every stage of the process to provide you with the estate planning tools needed to meet your objectives. To hear more about how we can help you with your elder law and estate plan needs, call us at (317) 684-1100, or contact us at our website today.