WHAT IS A LIVING TRUST?
A living trust is a legal document created by you (the “Grantor” or “Settlor”) during your lifetime in order to legalize your desires regarding your assets during your lifetime and after your death. A Living Trust has a “Trustee” who is in charge of the Trust and one or more “Beneficiaries” who benefit from the Trust.
There are many types of trusts, but the most popular types are the (1) Revocable Trust, (2) Irrevocable Trust, (3) Medicaid Asset Protection Trust, (4) Special Needs Trust and (5) Pooled Income Trust.
A Revocable Trust is the most popular type of Trust used for Estate Planning purposes. With a Revocable Trust, you set up a Trust for your own benefit and you remain in charge of the Trust during your lifetime. As such you are the Grantor, Trustee and Beneficiary all at the same time.
Upon your death, the Trust designates a “Successor Trustee” who manages the Trust and distributes the Assets in the Trust pursuant to its terms. There is also one or more “Successor Beneficiaries” who benefit from the Trust.
A Revocable Trust accomplishes the same goals as a Will, except a Trust does not have to go through a court process known as Probate after death. A Will has to be submitted to Surrogate’s court and the Will has to be “probated.” Probate is a lengthy and expensive process. During the Probate process, all beneficiaries and relatives who would have inherited if there was no Will are notified and are given the opportunity to challenge the Will. During this Probate process, the beneficiaries do not have access to your funds until the process (and any and all challenges to the Will) are complete.
A Trust bypasses the Probate process in its entirety for assets that are placed into the Trust. That means that upon your death, the beneficiaries have immediate access to your assets without going to court.
With a revocable Trust, you can also amend or revoke the Trust at any time while you are alive. After your death, the Trust terms become “irrevocable” and the succcesor beneficiaries named in the Trust get the assets designated to them by the you in the Trust.
Example: you set up a Trust and transfer your house and bank account into the Trust. While you are alive, you are the Trustee, meaning you remain in charge of the assets. You are also the beneficiary, meaning you get to use your money. In the Trust, you name a “Successor Trustee” (let’s say your son) and “Successor Beneficiaries” (let’s say your son and daughter). After your death, your son will distribute the assets in the Trust to himself and your daughter.
An Irrevocable Living Trust provides the same protections against Probate that a Revocable Trust does. However, with an Irrevocable Trust, you cannot be the Trustee. That means a third party (such as your child) must be the Trustee and must have full control of the Trust.
Because you do not have control of the Trust, the assets in the Trust are not deemed to be your assets and are therefore not available for creditors to take. Creditors only have access to your assets and with an Irrevocable Trust, the assets are not yours; it’s like giving up your assets to somebody else. An Irrevocable Trust is also used to minimize Estate Taxes.
The biggest drawback to an Irrevocable Trust stems from its name: irrevocable. While it is not true that the Trust is completely irrevocable, in order to make any changes to the Trust or to terminate it, the Grantor, Trustee and ALL beneficiaries must sign off.
MEDICAID ASSET PROTECTION TRUST (“MAPT”)
A Medicaid Asset Protection Trust (or MAPT) is a type of Irrevocable Trust established in order to assist individuals over the Medicaid Asset limit to qualify for Medicaid. Click here for more information about MAPTs.
POOLED INCOME TRUST
A Pooled Income Trust is a type of trust established in order to assist individuals over the Medicaid Income limit to qualify for Medicaid. Click here for more information on Pooled Income Trusts.
SPECIAL NEEDS TRUST
A Special Needs Trust (aka Supplemental Needs Trust) is type of Irrevocable Trust established for an individual receiving government benefits so as not to disqualify the individual from losing those benefits.
LAST WILL V. TRUST
Both a Will & Living Trust specify how your assets are to be disposed after death. However, after an individual dies, his or her Will has to be “probated” before the assets can be distributed as indicated in the Will. This process is costly and time consuming. It is not unheard of to spend over ten thousand dollars and six months probating a Will. This means that your family will not have immediate access to your assets after your death.
The Living Trust, unlike a Last Will, is treated as a separate legal entity. When the Trust is created, your assets are placed into the Trust. After death, probate is NOT necessary, thereby saving your family time, money and stress.
HOW MUCH DOES A TRUST COST?
We charge $3,000 for any type of Living Trust.
WHAT IS AN ESTATE PLANNING PACKAGE?
We charge $3,995 for an Estate Planning Package, which includes the following legal documents:
DO I NEED AN ATTORNEY TO DRAFT A LIVING TRUST?
Legally, you do not need an attorney to draft a living trust. However, in order for a Living Trust to be legally valid, it has to follow the exact specifications of the law. Failure to follow the exact legal requirements could result in disputes and legal challenges. It could also result in the Living Trust being completely voided.
Is the relatively small amount of money you may save worth the risk of not having a valid Living Trust?