Living Trust Questions Answered
We find that clients often ask us many of the same questions. With this in mind, we have put together a blog post that depicts a hypothetical conversation between a client and an attorney, and this one revolves around the revocable living trust as an estate planning tool.
Do you surrender control of assets that you sign over to a living trust?
This is one of the most commonly held misunderstandings in the estate planning realm. Many people assume that you lose control over assets that you convey into any type of trust, but this is not the case with a living trust.
A living trust is revocable, so you could rescind or revoke the trust at any time and take back direct personal possession of the property, but that’s not the only form of control. You would act as the trustee while you are still living, so you would retain total access to the property.
Who’s the trustee after you are gone?
The successor trustee selection is entirely up to you. It is possible to name someone that you know who is willing to assume the role, but you can alternately use a professional fiduciary.
A professional like a trust company or the trust section of a bank can be the ideal choice under certain circumstances.
Can you change the trustee designation?
Yes, this is one of the benefits that living trusts provide. You have the flexibility to change the trustee or the beneficiaries, and you can alter the terms of the trust at any time. If you want to convey property into the trust after it has been created, you are free to do so.
Is the probate court involved when the assets are being distributed?
The answer is no, and this is a huge advantage. When a will is utilized as an asset transfer device, it would be admitted to probate, and a long, costly legal process would ensue.
Is it possible to protect an inheritance from the beneficiary’s creditors?
Yes, you can include a spendthrift provision. The trust would become irrevocable after your passing, and the beneficiary would not have direct access to the principal. Creditors of the beneficiary would “step into their shoes,” so the lack of access would apply to them as well.
In addition to the fact that the principal can be protected, there is another important way that you can provide asset protection. You can instruct the trustee to distribute a certain amount each month (or on some other type of incremental basis) over an extended period of time
The beneficiary would never be in a position to burn through the inheritance too quickly if you go this route. Plus, the creditors could go after assets after they have been distributed, so the window will close quickly if the beneficiary is not in possession of distributions for very long.
Do assets in the trust count if I apply for Medicaid?
Some people are confused about this situation. Since the trust is revocable while you are living, you would be retaining incidents of ownership in a legal sense. Because of this, the assets would be counted, and they would not be protected from your own creditors.
Can you establish a joint living trust if you are married?
Yes, many married people create shared living trusts. This will often be the right way to go if there is a lot of mutually owned property and the spouses intend to leave their respective portions to one another.
Who will serve as the trustee if I become incapacitated?
You can name a disability trustee to assume the role in the event of your incapacity. This can be the same person or entity that will act as the successor trustee after you are gone, but this is not a requirement.
Schedule a consultation today!
We are here to help if you are ready to work with a Coral Gables, FL estate planning lawyer to put a plan in place. You can schedule a consultation appointment if you give us a call at 305-456-3255, and there is a contact form on this site you can use to send us a message.