Over the course of your lifetime, you will likely review and revise your estate plan several times. Each time you revise your plan you may add new estate planning tools and strategies to address your growing family and estate. One of the most common of those tools is a living trust. A better understanding of the many ways in which a living trust benefits your estate plan can help you to decide if one is right for you.
What Is a Living Trust?
All trusts can be broadly divided into two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s (trust creator) Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust activates during the Settlor’s lifetime. Living trusts can be further sub-divided into revocable and irrevocable living trusts.
Living Trust Benefits
Trusts, in general, have evolved considerably in recent years. Today, there is a specialized trust to fit almost any estate planning need or goal Some of the most common of those estate planning goals that can be furthered through the use of a living trust include:
- Keeping gifts private — if privacy matters to you, a living trust should be considered because the terms of a Will become a matter of public record when the Will is submitted for probate. If you prefer the terms of your estate plan to remain private, a trust is the better option as the terms of a trust do not, as a general rule, become public.
- Planning for the possibility of incapacity – if you were to become incapacitated tomorrow, who would take over control of your assets and finances? Without a plan, you can’t know the answer to that question with complete certainty. A revocable living trust helps you create that plan. It works by allowing you to name yourself as the Trustee of the trust, allowing you to control trust assets as long as you are able to do so. You name the person you wish to take over control of those assets as the successor Trustee. If you become incapacitated, control shifts to the successor Trustee automatically.
- Probate avoidance – assets gifted using a Last Will and Testament must first go through the probate process. That means the beneficiaries of the Will must wait until the conclusion of the probate process before receiving their intended gifts. Even a relatively modest and uncomplicated estate can take months to get through the probate process which is why using a revocable living trust is often a better option. The benefit of using a trust to distribute estate assets is that trust assets bypass the probate process altogether, allowing them to be distributed as soon after your death as you dictate using the trust terms.
- Protecting a minor child’s inheritance — your minor child cannot inherit directly from your estate. Shielding your child’s inheritance in a living trust ensures that those assets are protected until your child reaches the age of majority.
- Protecting assets — assets transferred into an irrevocable living trust become trust assets. As such, you no longer have an ownership interest in those assets, meaning they cannot be reached by creditors or other threats.
- Long-term care planning –like the odds of becoming incapacitated, the odds of needing LTC also increase with age. For many seniors faced with the high cost of long-term care, Medicaid is their only hope for help covering those costs. Qualifying for Medicaid, however, can put a retirement nest egg in jeopardy if you failed to plan ahead because of the Medicaid asset limits used to determine eligibility. Creating an irrevocable living trust as part of a larger Medicaid planning component within your estate plan can protect those assets and ensure your eligibility for Medicaid down the road.
- Retaining control over assets — once a gift is made in a Will it becomes the sole property of the beneficiary to do with as he/she pleases. A living trust though offers you the ability to use the trust terms to retain a certain degree of control over how the assets you gift can be used. You might include a provision that requires the assets to be used only to pay for living expenses, for example.
Contact Living Trust Lawyers
For additional information, please join us for an upcoming FREE seminar. If you have additional questions about living trust benefits, contact the experienced living trust lawyers at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.