A living trust is a powerful tool that you can use to help protect your assets and is an important part of your estate planning process. However, there are also some limitations on what a living trust can do that you need to be aware of if you are seeking the protections that a trust can provide.
Unsworth LaPlante, PLLC can assist you in understanding the rules surrounding living trusts so you can ensure that you make the most informed choices about the kinds of trusts that you want to create. In some circumstances, people will actually have more than one trust in order to accomplish different estate planning goals that they may have. We can assist you in determining if this is something you should consider, and can help with trust planning and trust creation. Give us a call to find out more about how a Vermont trust lawyer can assist you with the creation of a living trust.
Limitations of a Living Trust
A living trust is also called a revocable trust. This type of trust is useful for incapacity planning and for probate avoidance, but there are limitations to the types of protections that a living trust can actually provide you with.
When you make a living trust, you are usually the trustee who manages the assets held within your trust, unless or until you pass away or become incapacitated and have a backup trustee take over the management of trust assets. Because of the fact that you are still in control and you still have the ability to determine what happens to trust assets, you cannot necessarily shield the trust assets from being lost the way you can when you create an irrevocable trust and give up control.
While an irrevocable trust could help to keep your trust assets safe from estate tax, a living trust cannot and any assets held within your living trust can be considered to be a part of your taxable estate.
In most cases, your living trust is also not going to be useful in preventing trust assets from being lost if creditors make claims against you or if there are judgements against you. If you must go into a nursing home and you are forced to pay for the costs of care– as you likely will be because most insurers and Medicare only pay in limited situations- your assets that are held in your living trust are still going to be counted for purposes of determining if you can qualify for Medicaid or not. As a result, you typically will not qualify for Medicaid until trust assets have been spent down.
These limitations are substantial, but the fact that a living trust does not provide these particular types of protections does not mean that you cannot still benefit from the creation of a living trust.
Is Creating a Living Trust Right for You?
Creating a living trust is useful for many different reasons. The flexibility of the living trust is a big benefit for many people and is one reason why so many people create revocable trusts as part of their estate planning. The living trust is also going to be useful both if you become incapacitated and after your death.
If you become incapacitated, you want someone who you trust implicitly to manage your wealth to take over the control of actually making decisions about your assets. A living trust allows you to name a backup trustee and vest him with the authority to control trust assets right away so there will not be a delay in a trusted person taking control. Your family also won’t have to go to court and initiate guardianship proceedings so someone can get the authority to manage assets.
Assets held in a living trust can also transfer outside of the probate process, which means that new owners can take over asset management right away after death, and your loved ones will not need to wait for the probate process to inherit.
Getting Help from A Vermont Trust Creation Lawyer
A Vermont trust creation lawyer at Unsworth LaPlante, PLLC can help you with living trusts and irrevocable trusts. We also understand the rules for the creation of specialized trusts that you may need, such as a special needs trust or a spendthrift trust aimed at accomplishing particular purposes. To find out more about trusts and how trusts can fit in with your estate plan, download our free estate planning worksheet. You can also give us a call at (802) 879-7133 or contact us online to speak with a member of our legal team to get help with your personalized trust creation plan.