Living trust vs trust fund Legal Forms Company for over 20 years! Should You Avoid Probate With a Trust?
If you’re wondering what is a living trust and do I need one, you need to understand its role in estate planning to gain important advantages from its use. You don’t need to be rich to benefit from setting up a trust fund. A testamentary trust will be subject to court oversight during the probate process. Living trust forms fall under two general categories – revocable trust and irrevocable trust.
These categories can then be broken into further types, depending on their purpose, such as a charitable trust, special needs trust, Medicaid income trust, family trust, asset protection trust, etc. It’s possible for the same person to be named as grantor, trustee, and beneficiary. Irrevocable trust form – The creator of the trust, called the grantor, cannot terminate or change an irrevocable trust. Creditors are less likely to be able to claim to assets are owned by the grantor. Revocable living trust form – By being revocable, the grantor retains a degree of control over the assets. It is also sometimes called a grantor trust. A revocable trust provides less protection from attachment by creditors of the grantor.
When you compare a living trust vs will, trust forms aren’t required to be filed in court, and therefore, aren’t a public record. During probate, the terms of a will become a public record. Asset protection – A trust asset is owned by and in the name of the trust. In the case of an irrevocable trust, the grantor gives up ownership and control over the asset. Therefore, creditors of the grantor can’t claim the asset as long as it’s not fraudulently transferred to the trust. A spendthrift trust may also be used to prevent assets from mismanagement by a beneficiary.
Avoiding probate – Property owned by a trust is distributed outside of probate. This way, the costs, efforts, and delay of probate proceedings can be avoided. This is especially advantageous when you own real property in more than one state, so that the cost and burden of multiple probate proceedings are eliminated. Tax savings – Large estates with a significant estate tax liability can minimize taxes due through a properly drafted credit shelter trust. Separation of assets – For a couple contemplating marriage, putting assets into a trust can prevent them from becoming community property.
Pet protection – Many states now have legal recognition for a pet trust, allowing your to ensure that your pets are properly cared for if something should prevent you from caring for them. Preserving eligibility for benefits – A Medicaid income trust can be established at least five years prior to entering a nursing home to protect eligibility for Medicaid. For beneficiaries with disabilities, a special needs trust form can be used to receive gifts, inheritances, or settlements in lawsuits without being disqualified for disability benefits. Regardless of what you need, everyone should have a Will. You have an excellent service and I will be sure to pass the word.
Not sure which one is right for you? Disadvantages of a Last Will Vs. When you pass away, you leave behind an estate composed of your real property, personal property and other assets. Unless you leave instructions defining how these assets should be divided and amongst whom, the state decides which of your relatives will inherit your property.