A lot of people do not consider the possibility of using a trust because they think that you lose access to the assets that you convey into a trust. They are under the impression that this is the whole idea because you want to get resources out of your name for some reason.
This is partially true, but the matter of accessibility will depend on the type of trust that has been established.
Irrevocable Trusts
An irrevocable trust is self-explanatory with regard to the revocability factor, but there are some very limited exceptions. If you establish an irrevocable trust, you would not be able to act as the trustee, and for the most part, the terms would not be changeable.
You would no longer have direct access to and immediate control of the assets that are held by the trust. In some cases, this can be a good thing.
For example, irrevocable trusts are used by people that are exposed to the federal estate tax. It carries a 40 percent top rate, so it can have a significant impact, but it is only applicable on the portion of an estate that exceeds $12.92 million.
Certain irrevocable trusts facilitate asset transfers at a tax discount, and assets that are held by the trust are no longer part of the estate of the grantor.
Special needs planning can involve the use of an irrevocable supplemental needs trust. The purpose of the trust is to preserve benefit eligibility for people with disabilities.
If you establish this type of trust, the trustee that you name would be able to make the beneficiary more comfortable in many ways. However, eligibility for Medicaid and Supplemental Security Income would not be lost.
There are irrevocable trusts that are created to protect spendthrift inheritors from their own potential bad decision making. The beneficiary would not be able to reach the principal directly, and this would also apply to their creditors.
These are three of the most common reasons why people use irrevocable trusts, and there are some other circumstances that can call for the utilization of this type of trust.
Revocable Living Trust
Irrevocable trusts are not the only type of trust that can be used when you are planning your estate. A revocable living trust is another option, and this device can be the ideal estate planning centerpiece for a wide range of people.
If you establish the trust, you would act as the trustee, so you would have total control of the assets in every way. Because you can revoke the trust and reach the assets, they will be in play if you are sued, they would count for estate tax purposes.
However, there are other benefits that these trusts provide. One of them is the streamlined estate administration process. When a will is used, it is admitted to probate, and a costly and time-consuming legal process will be initiated. Distributions through the terms of a living trust are not subject to probate, so the estate administration process is simplified.
Check Out Our On-Demand Webinar!
We have recorded an on-demand webinar that covers important elements of the estate planning process. There is no charge to view it, and you do not have to go anywhere to do it, so this is a great way to invest some spare time.
You can obtain access if you head over to our on-demand webinar page.
Need Help Now?
If you are ready to put an estate plan in place, our doors are open. You can schedule a consultation appointment at our Memphis, TN estate planning office if you call us at 901-763-2500 or 866-997-6325.
There is also a contact form on this site you can fill out to send us a message, and if you reach out electronically, we will get back in touch with you promptly.
At Mendelson Law Firm, Mr. Wachtel focuses on Litigation (Business Litigation, Insurance Defense, Commercial Collections, Subrogation, Landlord/Tenant, Automobile Litigation, etc.), Probate and Estate Planning (Wills, Estates, Trusts, Powers of Attorney).
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