Do You Need a Revocable Living Trust?
One of the first questions many Elder Advisors Law clients ask is whether they need a Revocable Living Trust, an Irrevocable Trust, or an Asset Protection Trust. Let’s begin with a revocable living trust is a great paper trail for an asset protection trust, especially if Medicaid is needed later on. Next, let us discuss what trusts are and how they work. Then, we’ll explore their benefits, which should give you a better idea of whether a Revocable Living Trust is right for you and your family.
What is a Revocable Living Trust?
There are many different types of trusts and they can accomplish a wide range of goals. However, when most people think about trusts, the one they have in mind is a Revocable Living Trust.
A Revocable Living Trust is a legal document that allows the grantor (the person who creates the trust) to take personal assets and transfer them to the ownership of the trust. While the trust technically owns the assets, the grantor can continue to use them as he or she usually would.
When a Revocable Living Trust is established, the grantor names a trustee to manage the assets in the trust during the grantor’s lifetime. Most grantors name themselves as trustee, giving them complete control over the trust’s assets. Typically, a successor trustee is also named to take over management of the trust and distribute trust assets after the grantor passes away.
What are the benefits of a Revocable Living Trust?
One of the primary benefits of a Revocable Living Trust is that it enables assets held in the trust to avoid probate after the grantor’s death. This allows trust assets to be distributed to heirs quickly. The costs associated with probating the estate are also avoided. In addition, a Revocable Living Trust protects the privacy of the grantor (and beneficiaries) because the trust’s provisions are confidential. A Last Will and Testament, on the other hand, is a matter of public record. Anyone can access information about the decedent’s assets, creditors, debts, and more.
Another benefit of Revocable Living Trusts is they not only allow the grantor to control trust assets during life but also after he or she passes away. The grantor can stipulate when, how, and under what circumstances the successor trustee is authorized to distribute trust assets to beneficiaries. This is particularly important if the beneficiaries are not yet mature enough to manage an inheritance on their own, or in situations involving blended families. For example, the grantor could stipulate that children from a first marriage receive assets from the trust, not just the children from a more recent marriage.
Revocable Living Trusts can also be used to protect the grantor and the grantor’s family from a stressful and expensive guardianship proceeding if the grantor becomes incapacitated.
As we mentioned earlier, there are many different types of trusts. If one of your primary goals is to protect assets from long-term care costs, creditors, lawsuits, and other threats, an Irrevocable Trust or an Asset Protection Trust may be a much better option than a Revocable Living Trust. If you have a loved one with special needs, a Special Needs Trust can allow you to create a fund for goods and services not provided by Medicaid or Supplemental Security Income while protecting eligibility for these vital programs. A Charitable Trust allows the grantor to set aside money for both a charity and beneficiaries, realize certain tax advantages, and generate an income stream.
These are a few examples of various trusts and what they can accomplish. Suppose you’re still unsure whether you need a Revocable Living Trust. In that case, our Elder Advisors Law team will welcome the opportunity to explain your options in detail and, if appropriate in your particular circumstances, design and implement the trust right for you and your family.
