Many people hear the term “trust” and they envision a total loss of control over assets that have been conveyed into the device. In reality, this is not the case with all trusts, because they come in different varieties. The basic foundational distinction between trusts is the matter of revocation.
When certain circumstances exist, it can be beneficial to convey assets into an irrevocable trust that cannot be dissolved at some point in the future. If you were to establish this type of trust, you would be called the grantor or settlor. The underlying purpose would be to divest yourself of direct personal possession of the assets for one reason or another.
Why would you want to get assets out of your own name? People that are exposed to the estate tax often use certain types of irrevocable trusts that provide estate tax efficiency. Another reason why you may want to establish this type of trust would be to minimize your assets so you can qualify for Medicaid to pay for long-term care. These are a couple of reasons why these trusts are used, but there are others.
Revocable Living Trusts
In addition to irrevocable trusts, there is another type of trust called a revocable living trust. As the name would indicate, after you create the trust, you would be able to revoke it if you ever choose to do so. You can simply dissolve the trust and take back direct personal possession of the assets at any time.
The control that you retain is not limited to the power of revocation. With any trust, there will be a trustee that acts as the administrator. You can serve in this role while you are alive and well if you establish a living trust. As a result, you have access to all of the assets in the trust. While you are living, you can also act as the beneficiary of the trust.
You have a lot of flexibility when you use a revocable living trust as the centerpiece of your estate plan. After you initially fund the trust, you can convey additional property into it at any time, and you have the ability to utilize the assets in the trust.
When you are stating your wishes in the trust agreement, you account for the events that will take place after you pass away. The first order of business will be to name a successor trustee to administer the trust when the time comes. It is possible to use someone that you know personally, but many people will use a fiduciary, such as a trust company or the trust department of a bank.
Your heirs would be named as the secondary beneficiaries of the revocable living trust. In the declaration, you leave instructions with regard to the way you want your assets distributed to the beneficiaries. The trustee would follow your wishes after you are gone.
With regard to the dynamic of the grantor of the trust acting as the trustee, there is a detail that should be considered. Unfortunately, a very significant percentage of elders become unable to make sound decisions at some point in time. There are various different causes of incapacity, but Alzheimer’s disease is at the top of the list.
In the trust declaration, you could name a disability trustee to act on your behalf if you ever become unable to make sound decisions on your own. It could be the same successor trustee that will handle the estate of administration tasks after you are pass away, but you could name a different disability trustee.
Download Our Free Estate Planning Worksheet!
We have provided a bit of basic information about estate planning tools in this post, and there are many other vital resources that you can access through this website. One of them is our estate planning peace of mind worksheet.
Our Cincinnati revocable living trust attorneys have carefully prepared this useful tool that will help you understand the estate planning process. It is being offered free of charge at the present time, so you have everything to gain and nothing to lose if you gain access to your copy.
To do just that, visit our estate planning worksheet page and follow the simple instructions. And of course, if you would like to discuss your estate planning objectives with us in person, our doors are open. You can send us a message to request a consultation appointment or give us a call at 513-721-1513.