People who have not looked into the subject very deeply often make general assumptions about estate planning that are not accurate. There are those who think that you have two choices: a will, or a single type of trust. This is one misconception, and the other misconception is the notion that a trust can only be useful for extraordinarily wealthy people.
In fact, there are numerous different types of trusts. One major distinction is the power of revocation. There are trusts that you can revoke after you create them, and there are other trusts that cannot be dissolved.
Revocable Living Trusts
First, let’s look at the value of revocable living trusts. These trusts are useful for a wide range of people, but they do not satisfy every possible estate planning objective.
One major benefit that you gain when you use this type of trust is a retention of control. If you ever wanted to dissolve the trust and take back the assets, you could do so, because the trust would be revocable.
The control is also there while the trust is intact, because you can act as the trustee and the beneficiary initially. In the trust declaration, you name successors to take over these roles after you pass away.
A major benefit that you gain when you use a revocable living trust is the ability to leave instructions that the successor trustee would be compelled to follow with regard to distributions to the beneficiaries.
When a will is used, the inheritors would receive lump-sum distributions. This can be a source of concern if you want to make sure that your loved ones have resources to draw from over the long haul. If you feel this way, you could instruct the trustee to distribute limited assets on a monthly basis over an extended period of time.
You can also account for latter life incapacity when you have a living trust. The successor trustee could be empowered to administer the trust in the event of your incapacitation. This is a major plus, because many elders become unable to handle their own financial affairs late in their lives.
Trusts that you cannot revoke are useful for other purposes. You do surrender control when you convey assets into this type of trust, because you cannot dissolve the trust and take back direct personal possession of the property.
However, because of this loss of control, resources in an irrevocable asset protection trust would be protected if you were to be sued. These trusts are also used by people who want to reduce their estate tax exposure.
An irrevocable trust can also be useful if you want to get assets out of your own name so you can qualify for Medicaid to pay for long-term care.
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Contact us through the following page if you would like to discuss your estate planning objectives with a licensed professional: Central New Jersey Estate Planning Attorneys.