There are some situations where a “simple will” is not enough. Instead, an attorney may suggest you use a Trust, of which there are two basic categories: testamentary and inter vivos. A testamentary trust is one created by your Will, and it does not come into existence until you die. In contrast, an inter vivos trust starts during your lifetime, meaning you create it now, and it exists throughout your life.
There are two types of inter vivos trusts: revocable and irrevocable.
What Are Revocable Trusts?
Revocable trusts are often referred to as “living” trusts. With a revocable trust, the person who created the trust, often called the “grantor” or “settlor”, maintains complete control and may amend, revoke, or terminate the trust at any time. This means that the grantor can take back the funds put in the trust or change the trust’s terms. Thus, the grantor is able to reap the benefits of the arrangement while maintaining the ability to change the trust at any time prior to death or disability.
Revocable trusts are generally used for asset management and probate avoidance. They permit the named Trustee to administer and invest the trust property for the benefit of the settlor or one or more beneficiaries.
At the death of the grantor, the trust property passes to the beneficiary or beneficiaries. It does not come under the jurisdiction of the probate court and its distribution need not be held up by the probate process. However, the property of a revocable trust will be included in the grantor’s estate for tax purposes.
What Are Irrevocable Trusts?
An irrevocable trust cannot be changed or amended by the grantor. Any property placed into the trust may only be distributed by the Trustee as provided for in the trust document itself. For instance, the grantor may set up a trust under which he or she will receive income earned on the trust property, but that bars access to the trust principal. The exact terms of this trust depends on the objective for creating the trust.
An irrevocable trust is a popular tool for medical assistance planning. This type of trust would protect your assets from nursing homes after five years under current law. You and your spouse cannot serve as Trustee so a third party is named, often a child or your attorney.
The Attorneys at Hoffman, Comfort, Offutt, Scott & Halstad, LLP can Help
The best way to approach estate planning is to address all of your questions and concerns with your attorney, and then create the best plan based on current circumstances. Your attorney can walk you through all the options.
If you need help with estate planning matters, including Wills, Trusts, Powers of Attorney, Advance Directives, or Elder Law, get in touch today by calling our office at (410) 848-4444. To see what others have said about us, please read our reviews.