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Trusts

Trusts

Revocable Living Trusts

A trust is a contract between the Grantor (the person who creates the trust), the Trustee (one who controls the trust) and the beneficiaries (those entitled to benefit from the trust). You, as Grantor, determine how the trust will be operated by the Trustee and who benefits, how and when. You can create a trust that permits you to be Trustee and give you the right to receive full benefits from it. This type of trust is typically referred to as a Revocable Living Trust and is often used as a substitute to your Will. It permits you to keep total control and access to all your assets during your life, and provides for the distribution of your assets to your beneficiaries at your death. We often refer to a revocable living trust as your “Book of Instructions.” A well established advantage to Revocable Living Trusts is the avoidance of probate, which is required if you use a will to distribute your assets after death. Other advantages of Revocable Trusts, when property drafted, can include:

  • Asset protection for your spouse after your death.
  • Special needs planning for disabled beneficiaries.
  • Asset management and protection for children who are not proficient with handling money.
  • Protection of assets from a spouse’s subsequent marriage after your death.
  • Disability planning in case you become disabled prior to death.
  • Asset protection for your children if in bad marriages or to ensure your assets don’t go to the “in laws.”
  • Keeping your affairs private (as opposed to open for public review in probate).
  • No court intervention required (handled entirely by Trustee you name in accordance with your detailed instructions).
  • Plan for proper management of your business in your absence.
Very few revocable living trusts provide these benefits. Only a qualified estate planning attorney will know how to incorporate these protections into your plan. While a Revocable Living Trust has many advantages, it does not protect your assets from a nursing home, lawsuits, divorce bankruptcy or other creditors.

Irrevocable Trusts

While a Revocable Trust permits you to maintain full control (as Trustee) and have access to all your assets (as beneficiary), an Irrevocable Trust, once created, may prohibit your right to control the trust (as Trustee) or have access to your assets, but you get to decide to what extent. It is a common misconception that irrevocable trusts, once created, cannot be changed. While that is true of many irrevocable trusts created to avoid estate taxes, it is not true of irrevocable trusts used for asset protection from lawsuits, nursing homes or other predators. An irrevocable trust is a trust you create for the benefit of yourself or others and once created, you, as Grantor, must give up your right to something. Debtor/Creditor law provides that whatever you can get, your creditors can get. You can have known creditors (i.e., bank/credit card debt) or unknown potential creditors (unforeseen lawsuits, nursing home, divorce). A typical “income only” irrevocable trust permits you to receive the income on your assets, but you must give up your right to your principal. In some irrevocable trusts, you can retain the right to change who gets your assets during your life and after your death, and maintain 100% control of your assets until your mental disability or death (asset protection trusts). Tax reduction/avoidance trusts are much more restrictive than asset protection trusts. Typically, you cannot retain any right to control or access any of the assets in an irrevocable tax reduction/avoidance trust. There are many irrevocable trusts available that are quite flexible and grantor-friendly. Call the Estate Planning Law Center to get counseled on all your options before creating an irrevocable trust.

 

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Legacy Building
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New Hartford, NY 13413
Phone: (315) 793-3622
Fax: (315) 793-0076

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Fayetteville, NY 13066
Phone: (315) 446-3850
Fax: (315) 793-0076

Email: info@eplawcenter.com

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