There are several tools available to accomplish estate planning goals. One of the most frequently used tools by estate planning attorneys is referred to as a “trust.”
Trusts come in all shapes and sizes. You can create a trust during your lifetime (called a “living” trust). Alternatively, you can have your trust come into existence upon your death (called a “testamentary” trust).
Let’s talk about living trusts. There are two main types of living trusts.
Revocable Trusts: Frequently used to transfer assets to family members following the creator’s death
|Can be used to avoid the probate court process (cutting down on time and expense to administer someone’s affairs)||No nursing home protection for assets placed into trust**|
|Allows the creator to appoint one person (oftentimes a child) to pay final bills and distribute assets||Need to make sure that all of your assets are directed towards the trust upon your death with correct titling or beneficiary designations|
|Can be changed or updated at any time by the creator||Otherwise, we may need to use the probate court process to transfer assets to your trust (eliminating the advantage of the trust)|
|Flexible if family circumstances change|
Irrevocable Trusts: Frequently used to protect assets from being used for nursing or long-term-care expenses
|Once an asset is owned by the trust for 5 years, it is exempt from being used to pay for assisted living or nursing home expenses||The creator is unable to change the terms of the trust after it has been established|
|If you have a falling out with a beneficiary, you can’t “take them out” of the trust|
|Once an asset is owned by the Irrevocable Trust, the trust gets the proceeds if the asset is sold|
|If you put your house into an Irrevocable Trust and sell it 7 years later, the trust gets the home proceeds. The funds can’t be used for the creator’s own personal expenses (vacation, paying bills, paying rent in a new apartment, etc.)|
If you have questions about which type of living trust is right for you, our estate planning attorneys are ready to assist you.
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