Trusts: What Can They Do For You?
In simple terms, a trust allows you to grant someone else ownership and control of your property or assets. The person you transfer ownership to is called a Trustee, and the Trustee agrees to the conditions outlined in the agreement. Those conditions are set between you and the Trustee, and it can be a revocable trust or an irrevocable trust.
How Do Revocable And Irrevocable Trusts Differ?
The advantage of a revocable trust is that your estate doesn’t have to go through a long probate. But, your appointed Trustee can be careless with your assets and lose them altogether.
An irrevocable trust is a safer way to preserve your assets for your beneficiaries, although once you embark in an irrevocable trust, it can’t be changed.
There are various types of trusts that can be beneficial in many different ways. For instance, one type of trust can help to reduce income taxes and eliminate or reduce estate taxes. This can save potentially tens of thousands of dollars or more and keep more money in your estate.
Trusts can prevent your property from being seized by creditors while you’re alive or after you pass away. The Medicaid Asset Protection Trust, for example, can help protect your home and any assets you have from having to be sold off or seized should you need long term care in the future.
However, you need to allow a five-year period for the trust to be valid without penalties because Medicaid looks back during that time to make sure you didn’t transfer control just to avoid losing your assets.
As elder law attorneys, we understand how to legally leverage the Medicaid rules of asset and transfer guidelines to protect your assets if you should require long term care.
Gift and loan strategies, annuities, and other tools are available to protect you in spite of the five-year look-back period. This is invaluable since you may not have time to prepare in the eventuality of needing long-term care.
Other Reasons You May Want to Consider a Trust
A trust is a good idea if you want your property or asset to be used in a certain way. For example, you may stipulate that a certain portion of your estate is used for medical care or even a college education.
You may not have full confidence in certain beneficiaries to manage their inheritance, so you may designate only a certain portion to be released at certain intervals.
If you plan to leave something to younger generations in the family, such as grandchildren, you may leave instructions that they must wait until they attain a certain age to receive their inheritance.
Setting up a trust is more complicated than drawing up a will. Any trust you have drawn up must be precise and allow for tax consequences. Again, because trusts are tedious matters, it’s best to consult a knowledgeable attorney who’s fully versed in estate matters.
Choosing a Trustee
Above all, you should trust the person you are considering as a Trustee. He or she should be adept in financial matters and care about respecting your wishes as well as fairness for your beneficiaries.
The Trustee can be a member of your family, a professional advisor, or a friend. Someone who knows the beneficiaries of your estate will be better able to serve your goals.
It’s also a good idea to choose a back-up in case your original Trustee can no longer fulfill the role.
Things to Consider When Establishing a Trust
There are a few considerations when establishing a trust. You’ll want to discuss the benefits and downfalls of them with your attorney.
- Who will you name as beneficiaries of your trust and what amounts do you want them to receive?
- Do you want to create a separate trust for all beneficiaries or a single trust?
- Do you want to allow the Trustee to have full control or do you want them to follow your wishes exactly as you wish?
- How will you plan for income and estate taxes?
- Do you have a plan to protect your property from your beneficiaries’ creditors?
There are likely more considerations that our attorney can help with. Once we are familiar with your particular situation, we can offer more personalized advice.
Individualized Guidance For Your Future
Going through the process of establishing an important legal document, such as a trust, can be overwhelming on your own. At Wyatt & Butterfield, LLC, we know life’s uncertainties and challenges can lead to stressful times, so we work diligently to take the pressure off of you. Contact us to find out how we can help you.