A comprehensive estate plan will typically incorporate a wide variety of estate planning tools and strategies into the plan to accomplish the plan’s goals and objectives. Among the most popular of those tools is a living trust. Only your estate planning attorney can help you decide if a living trust would be a beneficial addition to your estate plan; however, to give you an idea of how one might fit into your estate plan, the Grand Forks trust lawyers at German Law explain common reasons you might want to create a living trust.
Incapacity Planning
Incapacity can strike anyone at any time. In fact, you stand a one in five chance of suffering a period of disability that lasts at least five months prior to reaching retirement age. A revocable living trust is a very commonly used incapacity planning tool. It works like this: As the Trustor of the trust, you name yourself as the Trustee and name someone you wish to take over control of your assets in the event of your incapacity as the Successor Trustee. Major assets are then transferred into the trust. Because it is a revocable trust, assets can easily be transferred in an out as needed. As the Trustee, you control those assets while you are capable of doing so; however, if you become incapacitated, control over the trust assets automatically shifts to the Successor Trustee without the need for court intervention.
Parents with Minor Children
A living trust can provide several benefits to the parents of minor children. As the Trustor of the trust, you appoint the Trustee, and any successor Trustees, allowing you to decide who will protect and manage the inheritance you leave your children. In addition, a trust lets you stagger the inheritance you leave your children instead of giving them a lump sum and lets you decide when they receive those distributions. No matter how mature a child may be, handing an 18 year old a large lump sum inheritance is rarely a wise idea. Instead, you may wish to direct the trust to distribute that inheritance in increasingly valuable disbursements over the course of several years to allow your child an opportunity to learn to handle his/her finances.
Special Needs Planning
Eligibility for most government assistance programs, such as SSI and Medicaid, is dependent on the participant’s income and assets. Consequently, you must be careful about gifting assets directly to a beneficiary with special needs, both while you are alive and upon your death. A Special Needs Trust, also referred to as a “supplemental” needs trust, is a specialized irrevocable living trust that can help you gift to a beneficiary with special needs. It allows you (and other family members) to designate assets to be used to supplement the care provided by other programs, such as Medicaid and SSI, without those assets counting against the beneficiary when determining eligibility for assistance.
Asset Protection
A living trust can be an effective asset protection tool if the right type of trust is created. Neither a testamentary trust nor a revocable living trust will work as an asset protection tool because assets held in either trust remain accessible to the Settlor and, therefore, are part of the Settlor’s estate in the eyes of the law. Consequently, the law considers those assets to be fair game for creditors or spouses. In addition, those assets are counted as part of your “countable resources” when considering your eligibility for Medicaid as a senior if you ever need help covering the high cost of long-term care. On the other hand, assets transferred into an irrevocable living trust become the property of the trust once the transfer is complete. As such, the Trustor no longer has a legal interest in the assets held in the trust which means that the assets are not accessible by creditors of the Trustor, a spouse in a divorce, or others who might threaten the assets. That does not mean, however, that you cannot continue to benefit from the trust.
Probate Avoidance
Assets held in a trust are non-probate assets. One popular strategy that can significantly decrease your estate’s exposure to probate is to create a revocable living trust and transfer most of your assets into the trust. By naming yourself as the Trustee, you continue to control all the trust assets while you are alive; however, upon your death those assets are handled outside of the probate process. You can use the trust terms that you create to direct the distribution of the trust assets immediately following your death or you can name someone as the successor Trustee and allow some, or all, of the assets to remain in the trust until such time as you wish them to be distributed.
Contact Grand Forks Trust Lawyers
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about living trusts, contact the Grand Forks living trust lawyers at German Law by calling 701-738-0060 to schedule an appointment.
- Do You Need a Pour Over Will? - June 8, 2023
- Why a Family Caregiver May Not Be the Best Choice - June 6, 2023
- What Might Be Missing from Your Estate Plan? - March 7, 2023
