In this series of blogs we have covered, in very basic terms, what the differences are between wills and trusts. We have learned what some of the benefits and pitfalls of a will are, and today we will cover some of the different kinds of trusts and what are some of the advantages and disadvantages of each type.
If you’re ready to ensure that your assets end up where you want them in the event of incapacitation or death, contact us. We specialize in helping people write their wills, establish trusts, and we can help you with any elder law crises you may have.
A revocable, or living, trust is one in which the person (the grantor) who set up the trust with their assets has the ability to change the conditions of the trust or to cancel it. A revocable trust is a nice option to have for many people because it allows them to adjust the levels of income they receive from the trust, or to keep adding income into the trust while still having the piece of mind that once they have passed away that the trust will be transferred to their beneficiaries. It also offers the advantage of having someone else administer the trust in case of mental or medical problems.
Like other kinds of trusts, provisions can be set for how it will be distributed after the death of the grantor, which can be helpful if the grantor is worried that the assets will not be used responsibly by one or more beneficiary. The most common form this takes is regular dispersals of money instead of the entire amount.
Trusts, unlike a will, can be very expensive to create and upkeep. To keep property and assets out of probate, each much be granted to the trust and have a new title drawn up that reflects the trust’s ownership. Any assets that can’t be added to the trust must be covered in the will or they will have to go through the probate process. Revocable trusts also don’t really offer any tax benefits for the grantor because the grantor has already had to pay the taxes on the assets that fund the trust.
As the name implies, an irrevocable trust is one that cannot be changed or terminated by the grantor. All of the assets within an irrevocable trust are owned by the trust and not by the grantor.
While this might seem a bit frightening, there are many advantages to an irrevocable trust. First, it keeps away creditors and other people you might owe money to. Because you do not own the assets in a trust, they can’t be taken away from you and people aren’t allowed to take assets from any person or a trust that isn’t a party to a suit.
Second, an irrevocable trust can be a great way to reduce the overall value of your estate for tax purposes. Because you have added most, or all, of your assets to the trust, your tax responsibilities can drop dramatically, which is especially helpful if you’re worth upwards of 5 million dollars.
Having your assets granted to a trust can also help you qualify for certain government benefits like Medicaid and Social Security and will help prevent you from losing a great amount of your assets to pay for late stage medical or nursing care. At Safe Harbor Wills and Trusts, we specialize in helping you with asset protection.
As you can see, asset protection and trust creation can be a complicated process. At Safe Harbor Wills and Trusts, we will do the hard work for you and we will do it right. Make sure that your assets end up where you want them to end up when you pass away by planning for the future now. Contact us today.