There is an old expression about using the right tool for the right job, and this dynamic can be applied to the process of estate planning. In the field, there are different types of trusts that can be utilized. The appropriate choice will depend upon the circumstances, so you should act in a fully informed manner.
Revocable Living Trusts
First, let’s look at the revocable living trust, because this type of trust can be very effective for a wide range of people. You do not have to be extraordinarily wealthy to use a living trust as the centerpiece of your estate plan.
Some people automatically turn away from the possibility of the utilization of a trust of any kind, because they are concerned about a loss of control. What if things change in your life and you need the assets that you conveyed into the trust?
This is an unwarranted concern when it comes to revocable living trusts. As you can immediately see from the name of the device, it is revocable. At any time, you can dissolve or revoke the trust, and it would no longer exist. The assets that were in the trust would become your direct personal property once again.
You can also act as the trustee while you are living, and you can act as the initial beneficiary, so you would be in charge of the trust throughout your life.
After you pass away, the successor trustee that you name in the trust declaration would transfer assets to the successor beneficiaries in accordance with your wishes. These distributions would not be subject to the probate process, and this is a major benefit.
Plus, if you use a will instead of a living trust, you would be allowing for lump-sum distributions. With a living trust, you can instruct the trustee to distribute limited assets over an extended period of time to prevent squandering.
In legal parlance, you retain incidents of ownership when you create a living trust, because you have so much control. As a result, assets in a living trust would be counted as part of your estate for tax purposes. They would also be within reach if you were to become the target of a lawsuit.
The Medicaid program becomes important to many senior citizens, because it will pay for long-term care. Medicare does not pay for long-term care, and it is quite expensive. You cannot qualify for Medicaid if you have significant assets in your own name. Assets in a living trust would be countable for Medicaid purposes.
There are different types of trusts that are not revocable that you could use to address these concerns.
Contact Our Firm
As you can see, there are many different tools in the estate planning toolkit. If you would like to explore them, send us a message through this page to set up a consultation: Indianapolis IN Estate Planning Attorneys.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.