If you are a resident of Blue Ash or any of the other communities we serve, a revocable living trust could be the right choice for you. As the name would imply, after you establish this type of trust, you have the ability to revoke or dissolve it at any time and take back direct personal possession of the property. Since you have this latitude, you are retaining incidents of ownership in a legal sense.
In addition to the power of revocation, when you establish a revocable living trust, you can act as the trustee and the beneficiary throughout your life. When you create the trust agreement, you name successors to assume these roles after you pass away. After you are gone, the trustee that you name would distribute assets to the beneficiaries in accordance with your wishes.
One of the primary reasons for utilizing a revocable living trust is the avoidance of probate. When a will is used, it must be admitted to probate, and the court provides supervision during the estate administration process. Probate is time-consuming and expensive, and there is a loss of privacy, because probate records can be obtained by the general public. If you use a living trust instead of a last will as your postmortem asset transfer vehicle, the probate court would not be involved.
Estate Tax Efficiency
A revocable living trust can be useful for a wide range of people, but there are other options that are more appropriate for certain situations. It may be comforting to be able to control the assets in a trust, but when you retain incidents of ownership, the assets are still yours in the eyes of the law. For example, assets in a living trust would be looked upon as part of your estate for estate tax purposes, and the resources would not be protected from creditors.
Granted, only a small portion of the population is exposed to the estate tax, because there is a relatively high exclusion. The estate tax credit or exclusion is the amount that can be transferred before the tax would become applicable. In 2018, the amount of the exclusion is $11.18 million. Though it is a limited pool of people, high net worth individuals are faced with serious legacy erosion, because the maximum rate of the estate tax is a whopping 40 percent.
As we have stated, assets in a revocable living trust would be part of your taxable estate. However, things are entirely different with irrevocable trusts. You surrender incidents of ownership when you convey assets into this type of trust, so the resources would not be part of your estate for tax purposes. There are a number of different types of irrevocable trusts that are used by people that are looking for estate tax efficiency. These would include generation-skipping trusts, qualified personal residence trusts, grantor retained annuity trusts, and charitable lead trusts.
Self-Settled Asset Protection Trusts
There is another type of irrevocable trust that can be quite useful for some individuals. If you have concerns about creditors reaching your property in the future, you could potentially convey some of your resources into a self-settled asset protection trust. This legal device is alternately referred to as a domestic asset protection trust.
A trustee would administer the trust, and you as the grantor would not have the ability to touch assets in the trust. However, the trustee would have the discretion to distribute income and even parts of the principal to you or to members of your family. Self-settled asset protection trusts can be legally established in 15 states at the present time. We practice law in Ohio, and you can in fact create this type of trust in our state.
Go Forward With Peace of Mind!
It is important to feel confident about the way that your assets will be transferred to your loved ones after you pass away. We do everything possible to provide a steady stream of information on this website, and there are a number of tools available to you. One of them is our peace of mind estate planning checklist.
Our Blue Ash living trust attorneys have devoted a lot of time and effort to the creation of this valuable tool, and you will definitely come away with a better understanding of the estate planning process if you take advantage of it. To obtain your copy, visit the following page and follow the simple instructions: Blue Ash, OH Estate Planning Worksheet.