Far too many people make estate planning decisions without having a full understanding of the options that are available. They want to put some type of estate plan in place without exerting a lot of effort, and they use DIY templates to create simple wills.
This is better than nothing, but a trust will be a better choice in many if not most instances. In this post, we will share five things that you should know about the utilization of trusts so you can come away with a more informed perspective.
Trusts are not strictly for the wealthy.
One of the major misconceptions in the estate planning field is the idea that ordinary people use wills, and multimillionaires use trusts. It comes from a kernel of truth, but there is a broader picture that should be considered.
Yes, there are trusts that are used by high-net-worth individuals that have complicated holdings, generational wealth, and estate tax concerns. However, there are other types of trusts that are useful for people that are not among the financial elite.
You do not necessarily lose control of assets in a trust.
Getting back to trusts and the wealthy, assets that are conveyed into an irrevocable trust are no longer part of your estate for tax purposes. If you are the grantor or creator of this type of trust, you cannot act as the trustee, and you no longer have direct access to the principal.
In addition to the fact that you can revoke the trust at any time, you can make changes whenever you see fit. You can remove assets from the trust, and you can convey assets into it without any limitations or time constraints.
However, there are also revocable trusts. The revocable living trust is a very commonly used estate planning tool that is a good alternative to a simple will for a number of reasons.
You will act as the trustee if you establish this type of trust, so you would maintain complete control of the assets. In the trust declaration, you would name a successor trustee to handle the administration tasks after you are gone.
The distributions to the beneficiaries would not be subject to the legal process of probate, which is time-consuming and expensive. On the other hand, if you use a will to facilitate asset transfers, it would be admitted to probate.
A trust can protect your assets from devastating nursing home costs.
Most senior citizens will incur long-term care expenses, and 35 percent of elders will move into nursing facilities at some point. You can expect to pay $150,000 or more for 12 months in a nursing home in the Oakdale, MN area, and Medicare does not pay for custodial care.
Medicaid, which is a need-based health insurance program, will cover long-term care costs. If you convey assets into an irrevocable trust at least five years before you apply for Medicaid to pay for long-term care, the assets in the trust will not count, and you can qualify for coverage.
You can use a trust to protect your minor children.
What would happen if you were to pass away while your children were still minors? Even if you have life insurance and/or resources that they would inherit, children cannot handle their own funds.
To account for this possibility, you can establish a revocable living trust, and there would be a trustee in place to manage the trust for the children if it becomes necessary.
We can help you make the right choice.
There are many tools in the estate planning toolkit, and we have just scratched the surface in this post. When you work with our firm, we will put you at ease, learn about your situation and your objectives, and make the appropriate recommendations.
At the end of the process, you will go forward with a tailor-made estate plan that is ideal for you and your family. If you are ready to get started, you can call us at 651-478-8999 to schedule a consultation at our Oakdale, MN estate planning office, and you can use our contact form if you would like to send us a message.
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