Commonly referred to simply as a “Living Trust”; this estate planning tool has a number of benefits that allow the Grantor(s) to avoid costly guardianship hearings, probate proceedings, and legal fees. Drafted correctly, a Revocable Living Trust can help your family legitimately avoid estate taxes and keep control of the property to benefit loved ones. Here are several benefits that are often overlooked:
- Revocable Living Trusts are private documents that do not require court approval. Beneficiaries will not have to wait for court permission to approve distributions of trust property. In addition to expediting the ability to distribute, Revocable Living Trusts also provide more privacy because courts do not itemize assets as they do in probate.
- Court challenges to wills are successful 25% of the time. A Living Trust is more difficult to attack partly because its instructions are not readily available to relatives or others who might be less than satisfied with the instructions set forth.
- A Living Trust can hold property owned by a family in more than one state and save the family the cost and difficulty of conducting probates in multiple states.
There are many benefits of Revocable Living Trusts and they certainly act as an important tool in many estate plans, however, there are a few misconceptions that need some clarification:
- Placing your property in a Living Trust will not protect it from creditors. If you retain the legal right to use the property in your trust, creditors con go after it. While there are types of trusts that do provide protection from creditors, Revocable Living Trusts do not fall into that category.
- A second misconception is that placing property into a Living Trust will protect it from nursing home costs. The assets in a revocable trust remain “relevant” for Medicaid purposes so they do not protect your assets from being used for nursing home costs.
- The last misconception we’ll cover, that Revocable Living Trusts can be used to avoid income taxes, is probably the most dangerous. Placing your property in a Revocable Living Trust will not change your personal income tax status or obtain for you any favorable income tax advantages.
In order to correctly determine if a Revocable Living Trust is the right estate planning tool for you, seek quality legal advice from a qualified estate planning attorney. There are many excellent sources right here in Madison.