A Trust is an Estate Planning tool with many variations. You may have heard of a Living Trust, also known as a Revocable Trust. A Revocable Trust is a Trust established during your lifetime, with you as the Creator or Grantor, and usually you as the Trustee, although another person may also serve as your Co-Trustee. A Revocable Trust has many uses. It can be used to avoid Probate, as the property funding the Revocable Trust at your death will be distributed to your beneficiaries by your Trustee. If you have several unequal beneficiaries, you may wish to use a Revocable Trust, as it generally does not go through a court, and the distribution is private. Also, if you own real property in another state, such property can be transferred or deeded into the Trust and therefore avoid another state’s proceeding upon your death. This trust is fully Revocable while you are alive, and you generally have full access to the principal and income. Upon your death, the Trustee may terminate the trust and distribute the property without the delay of a Probate Proceeding. Generally, executing a Revocable Trust and transferring Real Property into the Revocable Trust is a costlier Estate Plan than a Last Will and Testament, but the cost of Probate is eliminated. Because the Trust is Revocable during your life, the assets in the Trust may be counted as resources for long term care issues.
An Irrevocable Trust, also known as a Medicaid Protection Trust, is also established during your lifetime, but you have limited power and access. The Trustee will most likely be a trusted third party. Assets transferred into the Trust are no longer under your control, but generally the Trust terms will preserve a right to all income and a right to live and occupy your Real Property. Once assets are delivered to the Trustee, the 5 year “look-back” period begins. If transfers of the assets occurred prior to the look-back period, they are generally not counted as a resource when attempting to secure Medicaid benefits. However, it is imperative the Trust is drafted properly and the assets are transferred properly. An Irrevocable Trust, properly drafted and funded, will not be subject to a Probate proceeding. Such a trust can also be expediently distributed and terminated.
Contact us today to learn more about Trusts and how they can benefit your estate.