Did you know that, when it comes to estate planning, trusts can make for excellent wealth transfer vehicles? A trust is a legal arrangement that allows a third party, or trustee, to manage assets on behalf of a beneficiary or beneficiaries. A revocable, or living, trust is established during a grantor’s lifetime. The grantor can spell out his or her express wishes regarding assets and heirs in the trust document. A will can also provide estate instructions, but only becomes effective after one’s death and its entry in probate court.
There are many kinds of trusts, each one being designed for different circumstances and estate goals.
A revocable trust, or living trust, can be updated at any time while the grantor is alive. The grantor can put assets into the trust, retain control over them and change or revoke the trust whenever he or she wants. When he or she dies, however, the revocable trust automatically becomes an irrevocable trust.
A major advantage of revocable trusts is that they avoid probate. This is a huge benefit for grieving families. While this can also be said of irrevocable trusts, revocable trusts can provide a more flexible structure to make changes. Other benefits include the flexibility to make changes to provide protection from physical or mental incapacity in the form of a successor trustee.
An irrevocable trust, on the other hand, is similar to a revocable trust, except that it cannot be changed. Once it is signed, it cannot be taken back. Any assets placed into an irrevocable trust will no longer belong to the grantor. Instead, they will belong to the trust. This type of planning can be extremely beneficial under certain circumstances and is a topic you will want to discuss with your experienced estate planning attorney.
Another key benefit of an irrevocable trust can be protection from lawsuits. If someone were to sue you, they may not access any assets placed into an irrevocable trust because you do not own them anymore. Since you do not technically own them, you do not have to pay taxes on them. This is also beneficial for lowering income and wealth figures necessary to qualify for government support programs with strict eligibility requirements. Furthermore, irrevocable trusts can be structured by an experienced attorney to not only avoid the probate process but to protect assets from the potential cost of long-term care.
Determining which trust is right for you is no small decision. Not only will the outcome impact your estate, but it will influence your legacy and loved ones. Contact our office to schedule a meeting for us to go over your options with you.