One of the main benefits of living trust planning is disability planning. You maintain control over your finances only if you have disability planning; otherwise, the court may step in, through the conservatorship process, and takes over (even if you’re married.)
Your disability trustees who you have hand picked have control over any assets that are funded into your trust. This means that those you select to step into your shoes, should you become disabled, can only manage, invest, and pay bills with assets titled in the name of the trust. Funding your trust is thus important to best ensue that your trust works.
It is good practice to also have a general durable power of attorney (i.e. financial power of attorney) so your agent (likely, the same person as your disability trustee) can handle any assets that can’t be re-titled into your trust such as your retirement accounts.
The title of your retirement accounts cannot be changed because changing the title would accelerate all the income tax due on the account; a title change on retirement accounts is deemed under income tax laws as a distribution of all of the assets.
Your living trust will provide the definition of your disability, meaning that it will describe when you are deemed disabled. This avoids court interference and keeps you in control.
The trust will also authorize the disability trustees to take control of trust assets and follow the instructions of what you want to happen during any period of disability. For example, you may want to be cared for at home, if possible; and, you may want distributions to be made to care for your spouse and children.
If you don’t have an up-to-date disability plan in place that includes a living trust and a general durable (i.e. financial) power of attorney, consult with an experienced, qualified estate planning attorney. Be sure to ask about the health care estate planning documents you need during disability as well such as an advance health care directive.
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