Trusts can be very useful for a wide variety of people. Some trusts are used by high net worth individuals who are exposed to the federal estate tax. These would be irrevocable trusts. This type of trust could also be used by people who want to protect assets, and an irrevocable trust could help if you are spending down assets to qualify for Medicaid.
Many senior citizens seek eligibility for Medicaid because Medicare does not pay for long-term care.
Revocable Living Trusts
Revocable living trusts provide different benefits. A revocable living trust would not provide asset protection during your lifetime or estate tax savings (unless you are married). In addition to this, assets in a revocable living trust would be counted when Medicaid was determining your eligibility.
These trusts are popular for avoiding probate and providing asset protection for children after you pass.
If you use a last will instead of a trust to arrange for the distribution of your personally held assets, the process of probate becomes a factor. The executor or personal representative cannot immediately hand out inheritances after you die. There is a proving of the will, and during this process the probate court supervises the administration of the estate.
The probate process can be expensive, and it is time-consuming. Since the heirs to the estate don’t receive their inheritances until after the estate has been probated and closed, this time lag can present difficulties.
If you have a revocable living trust in place, you can act as the trustee and the beneficiary initially. As such, you control the funds, and you can revoke the trust if you want to do so. The estate tax savings, asset protection during your lifetime, and Medicaid planning advantages are not there because you do in fact maintain full control of the assets.
The primary benefits that you gain when you create a revocable living trust are the avoidance of the probate process and the availability of asset protection for beneficiaries. In the trust agreement you name a successor trustee to take over that role after you pass away, and you also name successor beneficiaries.
The successor trustee could distribute assets to the beneficiaries after your passing outside of probate.
Corporate Trustees
When you are choosing a successor trustee, you could choose an individual that you know, but you could alternately empower a corporate trustee to administer the trust after your passing.
When you have a corporate trustee you don’t have any longevity concerns, and there will be no conflicts of interest. There is inherent corporate oversight, and you can be sure that the trust is being administered by a professional fiduciary entity.
There are certainly a number of advantages that you gain when you utilize a corporate trustee.
Free Living Trust Report
To learn more about the role of the trustee, download our special report on living trusts. The report is being offered free of charge, and you can access your copy through this page: Northern Kentucky Living Trust Report.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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