TRUSTS

TRUSTS

There are two basic types of Trusts:

REVOCABLE TRUSTS

Revocable Trusts are often called Living Trusts. Revocable trusts are often used as a planning tool and they can be changed any time until the death of the grantor. The grantor is the person who sets up the trust. The grantor transfers ownership of assets (real estate, stocks, financial accounts) to a trust which is administered by a Trustee (someone appointed by the Grantor), and provides for successor trustees without court intervention. This Trust allows you to designate who will receive your assets and who will manage and distribute them after your death or disability outside the probate process. However, it provides no asset protection from Medicaid requirements and is subject to estate and inheritance taxes.

A revocable trust can be a wonderful option for planning for minor children or adults with money-management issues.

These trusts are not a right fit for every family; only an attorney with knowledge about your finances and family situation can evaluate if this device is right for you.

IRREVOCABLE TRUSTS

An irrevocable trust is generally a gift of assets to a third party trustee for the benefit of someone other than yourself. Gifts over annual federal gifting limit consumes a portion of the federal uniform gift allocation but no tax is imposed until the monetary threshold is reached. These trusts can be used to reduce the size of an estate, provide liquidity or protect assets from Medicaid eligibility with a 5 year look back. Another type of irrevocable trust is a special needs trust.

More information about trusts and special needs planning is available here.

If you are interested in utilizing a trust as part of your estate or Medicaid planning,