People who have not done much research into the subject sometimes assume that you have two choices when you are planning your estate: a last will or a trust. There is a shred of truth in this, but it is important to understand the fact that there are different types of trusts. Let’s look at one major distinction.
Right of Revocation
A major distinction between trusts would be the right of revocation (or lack thereof). There are trusts that you can revoke or rescind, and you could then walk away in direct personal possession of the resources that you conveyed into the trust. The trust would no longer exist.
These trusts are useful for people who have relatively uncomplicated circumstances. If you create a revocable living trust, you can act as the trustee and the beneficiary while you are alive and fully capable of making sound decisions.
You name successors to assume these roles after you are gone. When you create the trust declaration, you leave instructions regarding the way that you want the assets distributed. If you are concerned about a beneficiary squandering his or her inheritance, you can include spendthrift protections that the trustee would be compelled to follow.
Distributions from a living trust would not be subject to the legal process of probate. This is a major advantage that you gain when you use a revocable living trust in lieu of a last will because a will would be admitted to probate. This process is time-consuming, it can be expensive, and it is a public proceeding that strips your family of privacy.
There are also irrevocable trusts that cannot be dissolved. Though this permanency may seem disconcerting, there are some good reasons why you may want to utilize an irrevocable trust of some kind.
Some people convey assets into irrevocable trusts to gain estate tax efficiency. This tax carries a 40 percent top rate, and it is potentially applicable on asset transfers that exceed $5.43 million. Generally speaking, assets that have been conveyed into an irrevocable trust would be removed from the estate for tax purposes.
There are irrevocable trusts that provide asset protection, and you can also consider the creation of this type of trust if you want to get assets out of your own name so you can qualify for Medicaid to pay for long-term care. Medicare does not pay for living assistance, so this is a strategy that can pay dividends.
Obtain Detailed Information
We have shared some basic facts in this brief blog post, but you can learn a great deal more if you attend one of our upcoming seminars. The seminars will cover trusts and other topics and they are free to attend. To view the schedule, click the following link: Naples FL Estate Planning Seminars.