You have choices to make when you are devising your estate plan. If you have always thought that a last will would be the right transfer vehicle given your situation, you may be surprised when you hear about the benefits that living trusts provide.
If you use a last will, you would be allowing for lump sum distributions to the inheritors after your passing. This may not be the ideal scenario, but you don’t have to settle for it. With a living trust, you can instruct the trustee to distribute limited assets over an extended period of time to prolong the viability of the trust.
A will would be admitted to probate after you are gone, and the Surrogate’s Court would supervise the administration of the estate. There is nothing inherently negative about the probate process, but it is time-consuming, and the heirs must wait it out before they can receive their inheritances.
On the other hand, the trustee could distribute assets to the beneficiaries outside of probate if you use a living trust.
While it is not the most pleasant prospect to consider, many elders become unable to handle their own finances late in their lives. Alzheimer’s disease is a major cause of this, and it strikes almost half of people who are at least 85. If you have a living trust, you can empower a disability trustee to administer the trust if you become incapacitated at some point in time.
As you can see, there are a number of different benefits to be gained through the creation of a living trust. However, these trusts do not satisfy all estate planning objectives.
You can revoke a living trust, so you retain incidents of ownership in legal parlance. Because you still control the assets, they are part of your estate for tax purposes.
If you were to apply for Medicaid to pay for long-term care, the assets would be counted as well. Many elders do seek Medicaid eligibility, because Medicare does not pay for long-term care, but Medicaid will pick up the tab. Since it is a need-based program, you cannot qualify if you have significant assets in your own name.
Asset protection is another consideration. If you are ever sued, assets in a revocable living trust could be attached.
The good news is that there are different types of trusts that can address all of these circumstances. These trusts would be irrevocable trusts that you cannot dissolve.
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