As you move through the various stages of your life, your estate plan will likely need to grow and expand in order to meet your changing needs. As such, you will undoubtedly make use of a variety of estate planning tools and strategies in your growing estate plan. One of the most popular additions to a comprehensive estate plan is a living trust. Understanding some of the common living trust benefits can help you decide if a living trust is right for your estate plan.
What Is a Living Trust?
All trusts can be broadly divided into two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s (trust creator) Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust activates during the Settlor’s lifetime. Living trusts can be further sub-divided into revocable and irrevocable living trusts.
Living Trust Benefits
A living trust can provide numerous benefits to your estate plan, including the following:
- Avoiding probate – assets gifted using a Last Will and Testament must first go through the probate process. That means the beneficiaries of the Will must wait until the conclusion of the probate process before receiving their intended gifts. Even a relatively modest and uncomplicated estate can take months to get through the probate process which is why using a revocable living trust is often a better option. The benefit of using a trust to distribute estate assets is that trust assets bypass the probate process altogether, allowing them to be distributed as soon after your death as you dictate using the trust terms.
- Incapacity Planning – if you were to become incapacitated tomorrow, who would take over control of your assets and finances? Without a plan, you can’t know the answer to that question with complete certainty. A revocable living trust helps you create that plan. It works by allowing you to name yourself as the Trustee of the trust, allowing you to control trust assets as long as you are able to do so. You name the person you wish to take over control of those assets as the successor Trustee. If you become incapacitated, control shifts to the successor Trustee automatically.
- Protecting a minor child’s inheritance — your minor child cannot inherit directly from your estate. Shielding your child’s inheritance in a living trust ensures that those assets are protected until your child reaches the age of majority.
- Asset protection — assets transferred into an irrevocable living trust become trust assets. As such, you no longer have an ownership interest in those assets, meaning they cannot be reached by creditors or other threats.
- Controlling the use of assets — once a gift is made in a Will it becomes the sole property of the beneficiary to do with as he/she pleases. A living trust though offers you the ability to use the trust terms to retain a certain degree of control over how the assets you gift can be used. You might include a provision that requires the assets to be used only to pay for living expenses, for example.
- Medi-Cal planning –like the odds of becoming incapacitated, the odds of needing LTC also increase with age. For many seniors faced with the high cost of long-term care, Medi-Cal is their only hope for help covering those costs. Qualifying for Medi-Cal, however, can put a retirement nest egg in jeopardy if you failed to plan ahead because of the Medi-Cal asset limits used to determine eligibility. Creating an irrevocable living trust as part of a larger Medi-Cal planning component within your estate plan can protect those assets and ensure your eligibility for Medi-Cal down the road.
- Keeping gifts private — if privacy matters to you, a living trust should be considered because the terms of a Will become a matter of public record when the Will is submitted for probate. If you prefer the terms of your estate plan to remain private, a trust is the better option as the terms of a trust do not, as a general rule, become public.
Contact Sacramento Living Trust Attorney
Please download our FREE estate planning checklist. If you have additional questions or concerns regarding living trust benefits, contact us at the Northern California Center for Estate Planning & Elder Law to find out today by calling (916)-437-3500 or by filling out our online contact form.