When you start to look into the subject of estate planning, you will invariably hear about a number of different types of trusts. This can all be rather confusing, so we will provide some clarity in this blog post.
Revocable vs. Irrevocable
A major distinction between trusts is the matter of revocation. There are trusts that you can revoke after you create them, and there are also irrevocable trusts.
You could use a revocable living trust if you have relatively simple and straightforward estate planning objectives. Assets in the trust would be accessible to you throughout your life, because you could act as the trustee and the beneficiary. If you ever wanted to, you could revoke the trust entirely, and it would no longer exist. The assets that were conveyed into the trust would once again become your direct personal property.
You would name a successor trustee in the trust declaration, and you would also name successor beneficiaries. After you pass away, the trustee would follow your instructions, and assets would be distributed among the beneficiaries in accordance with your wishes.
These distributions would not be subject to the legal process of probate. This process is time-consuming, and it would enter the picture if you were to use a last will instead of a living trust.
If you establish a revocable living trust, you are retaining incidents of ownership, because you still have complete control of the assets. As a result, assets in the trust would not be protected if you were to become the target of a lawsuit. Plus, they would be part of your estate for estate tax purposes.
Many elders apply for Medicaid coverage late in their lives, because this program will pay for long-term care. Medicare does not pay for living assistance, and most elders will need help with their activities of daily living at some point in time.
Since Medicaid is a need-based program, people often divest themselves of direct personal possession of property so that they can gain eligibility. Assets in a living trust would be counted if you were to apply for Medicaid to pay for long-term care.
There are irrevocable trusts can be used to protect assets, and you could use an irrevocable Medicaid trust to get assets out of your own name so that you can qualify for Medicaid. Irrevocable trusts are also used by people who are implementing estate tax efficiency strategies.
Contact Our Firm
If you would like to discuss your estate planning needs with a licensed professional, our firm would be glad to help. We offer no obligation consultations, and we can answer all of your questions and help you put a plan in place if you decide to proceed.
To set up an appointment, contact us through this page: Grand Forks ND Estate Planning Attorneys.