You may not consider the possibility of the utilization of a trust when you are planning your estate. Many people think that a trust is something that is a bit more fancy that essentially does the same thing as a will.
In reality, this is not the case at all. There are different types of trusts that can be used, and they can satisfy various different respective objectives.
Let’s look at some of the reasons why you may want to utilize a trust as part of your estate plan.
Some people are better money managers than others. If you were to leave a spendthrift a large direct inheritance in a will, he or she may burn through the resources quickly and experience hardships later on.
To react to this type of situation, you could convey assets into a revocable living trust. You would control the assets while you are living, but a trustee would distribute assets to the beneficiary after your passing.
You could instruct the trustee to distribute limited assets over an extended period of time to protect a spendthrift beneficiary.
There are also irrevocable spendthrift trusts that can add additional protections.
Special Needs Planning
People with disabilities often rely on Medicaid for health insurance. This is a government program that is only available to financially needy individuals. As a result, an increase in financial status can cause a loss of eligibility.
You could create a special needs trust to provide resources that could be used to improve the beneficiary’s quality of life without jeopardizing benefit eligibility.
Many people are concerned about potential lawsuits. There are asset protection trusts that can shield assets from litigants. You could use this type of trust to protect your own assets, but you can also use to trust protect assets that you are passing along to your loved ones.
Estate Tax Efficiency
The estate tax can be a factor for high net worth individuals. In 2015, the first $5.43 million that you transfer can be transferred tax-free, but the portion of your estate that exceeds this amount would potentially be subject to the federal estate tax.
There are trusts that can be used to preserve wealth for the benefit of your loved ones.
Medicaid is important to many seniors, because Medicare does not pay for long-term care. As we touched upon previously, you cannot qualify for Medicaid if you have significant assets in your own name.
If you convey assets into a Medicaid trust, the resources would not be counted when Medicaid was evaluating your eligibility status.
Schedule a Free Consultation
Our firm offers free consultations, and we can answer any questions that you may have about trusts. To set up an appointment, send us a message through this page: Grand Forks ND Estate Planning Attorneys.