Too often, the terms "Trust" or "Trust fund babies" conjure up images of the Rockefellers or Vanderbilts living extravagantly off their family wealth for generations.
In reality, there are numerous kinds of Trusts, and one need not have buildings named after them to enjoy the benefits and protections of a trust document. In short — you do not need to be wealthy to have a trust.
If you fall into one of the following categories, you should consider sitting down with an Estate Planning or elder law attorney to draw up a Trust:
If you do not have a will when you die, your children could receive your assets when they turn 18. If you have a will, you can at least delay that fact until they turn 25. However, many feel even a 25 year old can be ill-equipped to handle receiving tens or even hundreds of thousands of dollars. A trust allows you to install "circuit breakers," staggering the release of funds until your children are mature enough to handle them.
Most couples are extremely dedicated to taking care of each other's children, even if those children are the product of a previous relationship. However, too often, the level of commitment can wane after one spouse passes away, especially if the surviving spouse remarries a person who is less than interested in supporting someone else's kids. Establishing a Trust helps you ensure that the assets that you accumulated during your lifetime will pass on to your own children as you intended.
Most Americans do not pay an estate tax, mainly because the federal exemption is so large. An individual can now pass down over $12 million to estate beneficiaries without having to pay any sort of federal estate tax. A couple can leave behind over $24 million! Ohio has eliminated its estate tax. Kentucky does have an inheritance tax for beneficiaries that are not in the direct ancestral line.
Probate fees can become very expensive. The larger the estate, the larger the fees that will be due, especially if you own property in a different state. The property in that state will be subject to an ancillary administration which will drive up fees even further.
When former Reds owner Marge Schott passed away, she died owning over $120,000,000 in assets. How do we know this? She had vast funds that were not placed in a Trust. Therefore, her will and her list of assets are public record and available for public viewing on the probate court's web site. Trusts help you keep your affairs private and within the family.
Individuals with special needs often require the help of government assistance such as SSI, or Medicaid. Usually, such assistance requires the individual to fall below certain resource limits. In other words, they are not allowed to own too much money. Inheriting even a modest sum can actually do more harm than good as it might push the special needs individual over the resource limits and force him/her off of the government assistance. Certain types of Trusts such as a Pooled Medicaid Payback Trust or a Wholly Discretionary Trust can help you provide for your loved one while shielding the inheritance from being counted as a resource for government assistance eligibility purposes. You can use a Revocable Living Trust to funnel money into a Special Needs Trust to provide for your loved one.
Irrevocable Trusts may be drafted in a manner that allow you to pass assets on to a loved one, yet ensure that the money is still there should you need to tap into it to pay for your long term health care needs.
If you need Medicaid to help you pay for your care in a long term care facility, you will often be required to move in with a roommate in shared room. A Special Needs Trust can be written so that money can be set aside and then drawn upon to pay for a private room upgrade.
Let's Talk
If any of these scenarios apply to you, then you should consider speaking with an estate planning attorney about setting up a trust.
A trust can help protect your assets and ensure that they are distributed as you intended.
Don't wait until it's too late – take action today.
Revocable Living Trusts
For most individuals and couples, particularly those who fall into the first six categories above, a Revocable Living Trust is often the preferred option.
A Revocable Living Trust is a trust which you create during your lifetime. The fact that the trust is revocable means that it may be changed or terminated at your wish as long as you continue to be competent at that time.
One of the major benefits of having a Revocable Living Trust is allowing you to avoid probate. Also, it will allow a chosen agent to seamlessly manage your assets if you become incapacitated. You will still need a Will to serve as a back-up in case you fail to re-title assets in the trust’s name during your lifetime.
During your lifetime you will retain control of all the income and principal in your Revocable Living Trust. Upon your death, the Trust will pass down the assets however you have specified in the document, and it will do so outside of probate court.
The use of a Revocable Living Trust allows for property to be managed uninterrupted by incapacity. Through proper planning and funding of a Revocable Living Trust, if you were to become incompetent, your Successor Trustee will be able to step in and manage all your financial affairs for any items that are in the trust.
- Another major benefit of the Revocable Living Trust is that it avoids probate. Please note that by doing a Revocable Living Trust, you will not avoid all costs, as you will still have to pay legal fees for the drafting of the trust, and may have to pay fees for administering the trust. However, this is often less expensive than the probate process.
- Plus, the use of the trust will allow you to avoid much of the time delays and aggravations which are associated with the probate procedures.
- Further if you have property in other states than where you reside, it will also allow you to avoid probate in those states. Finally, some people like that a Revocable Living Trust provides privacy versus the probate process.
- One of the disadvantages of the Revocable Living Trust is that most of the expenses which you incur are done so immediately. The expenses are not deferred until your death, as is the case in probate.
- Trusts are more expensive to draft than wills.
- Trusts require a good deal of initial legwork because you have to change many ownership and beneficiary forms so that your trust is fully funded.
- Finally, if you utilize a bank or professional Trustee, there will be fees charged for managing the trust. Please note, however, these fees are often waived and not taken if the trustee is a family member who is going to be an ultimate beneficiary of the trust.
- If the trust generates any significant income after your death, an annual trust income tax return will have to be filed.
Let's Talk
Set up a consultation today.
Whether you're planning for your parents, your spouse, or even yourself, The Law Practice of Dennison Keller, LLC will meet you at the crossroads of legal and care advocacy to show you one clear path out of the maze and get you on the road toward your own peace of mind.
