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What is a Living Trust and Do I Need One?

October 26, 2018 by Port Legal Staff


Living Trust Need BG

It’s likely we’ve all asked ourselves questions like, “What if I can’t afford long term care in a medical facility without wiping out my savings?” and “How will my stay-at-home partner get access to assets if I die suddenly?”

Understandably, these issues are anxiety provoking for most of us and the answers sometimes raise even more complex estate planning questions. One such question might be, “Do I need a living trust or is a will sufficient to protect my assets after death?”

Let’s explore some of the features and benefits of setting up a living trust to help you answer some of these questions.

Trusts

Trusts are a different method of passing along your property than a will.  With a will, the survivors will need to go through probate court and all the assets will be listed and become a public record.  In most cases, a trust will eliminate the need to go to probate court and simplify the process of passing on your assets.

The law views assets placed in any trust as separate from you; it is a wholly independent legal entity, and survives your death.

A trust provides a layer of privacy and avoids the long and tedious probate process. When it comes to estate planning, owning your home and a vehicle are ample reason to consider a living trust to be your best option.

Let’s take a look at why a living trust might be an ideal solution for just such a situation.

Living vs. Irrevocable Trusts

Why is it called a “living” trust? In simple terms, because the trust is created during the grantor’s lifetime, and may be changed while the grantor is alive, it is considered “living.”

There are two types of trusts: revocable— also called a living trust— and irrevocable. It’s helpful to understand similarities and differences for each:

Revocable Living Trusts

  • Avoids probate court, protecting assets from fees, and your loved ones from frustration and headaches.
  • Provides clear and specific directions for the distribution of assets after you die, avoiding confusion and any family infighting.
  • Your privacy is maintained.
  • The trust may be amended or revoked during your lifetime.
  • Allows you to designate yourself as trustee so you control of your assets while alive.
  • No tax advantage exists for this type of trust.
  • Provides no protection from creditors.

Irrevocable Trusts

  • Avoids probate, protecting assets from fees and your loved ones from frustration and headaches.
  • Provides clear and specific directions for the distribution of assets after you die, avoiding confusion and any family infighting.
  • Your privacy is maintained.
  • The trust cannot be amended during your lifetime.
  • You cannot make yourself trustee, which means you cannot regain control of assets during your lifetime.
  • The law allows you to create income generating instruments within the trust, and direct that the income is regularly distributed to your personal accounts.
  • Because the trust’s provisions cannot be changed, it adds a layer of protection in the case of an irresponsible heir who may lose assets as the result of bad decisions.
  • Provides some protection from creditors.
  • May provide tax benefits.
  • Medicaid does not count this asset towards eligibility requirements, if you die at least 5 years after its creation, so you can preserve assets and still receive government benefits to help with nursing home costs.

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Both types of trusts provide a layer of privacy and set out clear directions for carrying out your wishes following your death. Both trusts also protect assets from probate.

Living trusts do not protect your assets from creditors, do not provide the tax benefits, nor increase your ability to meet some of the financial Medicaid eligibility requirements.

While it’s true that a living trust is subject to things like taxes and Medicaid eligibility requirements, a major benefit is that the grantor is legally allowed to amend or revoke the trust at any time during their lifetime. Additionally, the grantor has total control over the assets in a living trust, while a revocable trust does not offer this flexibility.

If you have significant assets you want to protect for generations after you die, and control over those assets during your lifetime is important to you, a living trust may be the right solution for your estate planning needs.

Port Legal has experts in the field of probate law and creation of living trusts, and would be happy to walk you through your options in a free, no obligation consultation today.

Our consultations are completely free of charge and intended to equip you to make the best decision.


Topics: Estate Planning, Trusts, Living Trust

Port Legal Staff

Written by Port Legal Staff