Revocable Living Trusts in Ohio are often misunderstood by those who have not talked with an estate planning attorney. In this post we would like to look at some of the details to clear up any misunderstandings.
Only for the Rich?
Some people assume that they should use a last will to state their final wishes because they don’t consider themselves to be wealthy. You can certainly use a last will if you want to, and many people do.
However, should not be blinded by the idea that Trusts are devised only for the interests of billionaires like Warren Buffett and Bill Gates.
People who are extraordinarily wealthy like the gentlemen mentioned above would have estate tax concerns because they have more than $5.25 million in total assets. Those with assets that do not reach this figure are not subject to the federal estate tax.
There are certain types of irrevocable Trusts that may indeed be useful for people who are exposed to the federal estate tax. However, a revocable Living Trust would really do nothing to provide these individuals with estate tax efficiency if they are unmarried. If they are married, however, a properly drafted Living Trust can double the estate tax protection to a total of $10.5 million for the couple
Revocable Living Trusts: What They Don’t Accomplish
Revocable living trusts don’t protect assets from creditors or litigants seeking redress. Nor do they protect assets from Medicaid spend-down rules. The assets that you convey into such a trust would be viewed as your personal property if you were to apply for Medicaid to pay for long-term care. There are upper asset limits, so this is a factor.
The Good News
Since only a minority of Americans have assets in excess of $5.25 million, most people are not looking for estate tax efficiency. Many individuals are not concerned about creditors or litigants because they are not in debt, and they have little to no exposure to legal actions.
If you simply want to arrange for efficient transfers of assets to your loved ones and you are not concerned about the estate tax or asset protection you may well benefit from the creation of a revocable living trust.
These trusts enable probate avoidance. When you use a will to direct future asset transfers it must be admitted to the probate court by the executor or personal representative. The nature of the probate process causes delays and conditions on the transfer of assets to the heirs.
When you convey assets into a revocable living trust they won’t be probate property after you pass away. The trustee that you choose will be able to distribute assets to your beneficiaries outside of the process of probate. Your affairs will be private, unlike probate cases that are open to the public.
You can establish limitations and stipulations about when and how heirs inherit, and the uses to which the inheritances are put. For example, if the circumstances of an heir are such that it would not be appropriate to give the person “control over the checkbook” immediately, or perhaps ever at all, this can be arranged through a Living Trust without locking the heir out of the benefits of the inheritance.
Special Needs children are a great reason for making a Living Trust. Second marriages where the spouses do not have mutual children, or where they have children from prior marriages or both, present an ideal profile for planning with a Living Trust.
There are many situations where a Living Trust is appropriate that are not related to tax planning. This blog only shows the very tip of the iceberg. For more information, surf to our website, www.zimmerlawfirm.com, where you can view and download various free reports.