There are many good reasons to create a revocable trust. Revocable trusts, or living trusts as they are also called, can provide important protection for your assets while still giving you flexibility and control over the wealth you transfer to the trust. However, there are also some limitations on what revocable trusts can do for you.
It is important to think about both the benefits that come with creating a revocable living trust as well as the downsides of this trust type.
Nirenstein, Horowitz & Associates can assist you with understanding how different kinds of trusts work and can help you to create the right type of trust that makes the most sense given your goals for asset protection. Give us a call to find out how our Connecticut trust lawyers can help you.
Downsides to a Revocable Trust
A revocable trust is useful for protecting assets because the assets that are held within the trust can immediately be managed by the trustee in case something happens to the trust creator. The trustee will have a fiduciary duty to manage the assets in an appropriate way and not to act out of self-interest. This means that the trust creator has the peace of mind of knowing that a reliable person will be able to immediately begin managing assets in the event of incapacity.
A revocable living trust is also beneficial for asset protection because it makes it possible for assets to transfer outside of the probate process. The new owners of assets can take control much more quickly than if the probate process must take place. This protects heirs or beneficiaries who stand to inherit, and makes sure the assets are under the control of new owners in as timely a manner as possible.
A revocable living trust provides all of these benefits while still allowing the trust creator to be in control of assets. The creator of the trust can be the primary trustee and has almost total flexibility when it comes to what he does with the trust assets. Unfortunately, it is the fact that the trust creator still has virtually unfettered control over trust assets that creates some of the downsides.
Because the trust creator still has control, the assets are not as protected as they could be. Creditors with valid claims could come after trust assets and the trust likely wouldn’t provide protection.
If the trust creator has to go into a nursing home and needs to qualify for Medicaid, the assets within the revocable living trust will generally still be counted as resources for the purposes of determining eligibility for Medicaid. This can make it impossible to get Medicaid to cover the costs of a nursing home until after assets have been spent down.
Assets that are held within the revocable trust can also still be considered a part of the taxable estate and thus estate tax can be charged on those assets, if the estate is large enough not to be exempt from estate tax.
Alternatives to a Revocable Trust
There are other kinds of trusts that work differently from revocable living trusts and that can provide some of the protections that a living trust cannot provide. If you want to try to avoid estate tax, keep assets safe from creditors, or qualify for Medicaid benefits to pay for nursing home care while protecting your wealth, you should talk with an experienced attorney about other kinds of trusts that you may be able to create.
There are always tradeoffs for getting different kinds of legal protections. If you want to avoid estate tax and keep your wealth safe in case you need Medicaid to pay for a nursing home, you may have to give up much more control over the wealth that you are trying to protect.
Nirenstein, Horowitz & Associates can help you to understand all of your different options and can assist you in making the choice that makes the most sense for you and your loved ones.
Getting Help from A Connecticut Trusts Lawyer
Nirenstein, Horowitz & Associates can help you with making a comprehensive plan that protects your assets and allows you to plan for your future and secure your legacy. Our legal team will work with you to select the trust that makes sense for your needs and to create a legally valid trust that provides the protections that you expect.
To find out more about different kinds of trusts so you can decide of a revocable trust is right for you, join us for a free seminar. You can also give us a call at 860-548-1000 or contact us online to talk with a Connecticut trusts lawyer and get personalized advice about trust creation.