Revocable living trusts are largely utilized to enable probate avoidance. Probate is a legal process, and it takes place under the auspices of the probate court. People often times try to avoid this process because it is time-consuming, it can be expensive, and it strips you of your privacy because it is a public proceeding.
However, there are some misconceptions about revocable living trusts. There are objectives that some people have that these devices will not accomplish, and we would like to look at three of them here.
Individuals who are in certain lines of work may be especially vulnerable to lawsuits, and we do live in a litigious society. Asset protection is a priority for people who are in this position. Revocable living trusts provide no asset protection because the grantor retains incidents of ownership.
Estate Tax Efficiency
It is possible to utilize certain types of trusts to gain estate tax efficiency. However, when you convey assets into a revocable living trust they are considered to be part of your estate for tax purposes.
Many seniors seek Medicaid eligibility because Medicare won’t pay for long-term care, but Medicaid will if you can qualify for the program. There are upper asset limits that you must stay within to be able to qualify for Medicaid coverage. Assets that you have placed into a revocable living trust are counted by Medicaid when evaluators are determining your eligibility.
It is wise to refrain from making any assumptions about legal devices. To be certain that you are executing the appropriate documents given your unique personal financial situation discuss things with a licensed and experienced estate planning attorney.
- What Are Advance Directives? - November 22, 2022
- What Is a Totten Trust? - November 8, 2022
- What Can Good Estate Planning Do for You? (Part 1) - October 25, 2022