Many adults probably tune out when they hear talk of estate planning, including wills, living wills, medical directives and trusts. After all, only the very wealthy really need an estate plan, right? In fact, every single adult, no matter their income or asset level, could benefit from a solid estate plan. A key component of many estate plans is a trust.
Trusts have many benefits over wills, and it is imperative that those considering an estate plan have a clear understanding of these documents. Having a top estate planning attorney who can clearly and concisely explain the differences in trusts can be invaluable. Everyone can benefit from a warm, relatable expert they can trust with the most personal details of their lives.
What is a Revocable Living Trust?
One of the most popular estate planning tools is known as a revocable living trust. The “revocable” part refers to the fact that the trust can be changed as life circumstances change. The “living” part refers to the fact that a revocable living trust is prepared while the person is living.
A revocable living trust will list the property at issue in the trust, name a trustee, and name beneficiaries in preparation for the preparer’s eventual death. The person the revocable living trust is prepared for is called the trustor, and this person often serves as the initial trustee. Upon the death of the trustor, a named successor trustee will take over the trust and execute it based on the decisions made by the trustor during his or her life.
Once the trust document is prepared, the trustor will transfer property into the trust. Separately titled property, such as real estate, must be re-titled in the name of the trust. While this is not a particularly complex process, it must be done correctly, or problems could arise later on.
What are the Differences Between a Revocable Living Trust and an Irrevocable Living Trust?
On its face, the most obvious difference between a revocable and irrevocable living trust is that the revocable trust can be, well…revoked. However, the issue is a bit more complicated than that, and the tax implications and legal consequences can be significant.
As noted, a revocable living trust can be changed at any time. Should the maker of the trust have second thoughts about a beneficiary, the revocable trust can be changed. Further, as life circumstances change (marriage, divorce, births and deaths), the revocable living trust can be changed accordingly. The entire trust can be revoked or changed via a trust amendment or restatement.
Many wonder why all living trusts would not be revocable, since revocable trusts appear to offer a high degree of flexibility. The downside to a revocable trust is that all assets in the trust are considered personal assets of the trustor for creditor and estate tax purposes. In other words, a revocable living trust offers absolutely no protection from a creditor claim or lawsuit judgement. Further, all the assets in a revocable living trust will be considered available assets for purposes of MaineCare qualification. Assets held in the name of the trust at the time of the trustor’s death will be subject to federal and state estate and inheritance taxes.
Irrevocable trusts cannot be changed after the agreement is signed. An irrevocable trust is typically used to accomplish specific planning goals such as estate tax reduction or long term care planning.
What are the Advantages of a Revocable Living Trust?
A revocable living trust can avoid probate and keep personal asset information personal. A revocable living trust does not have to go through an expensive, time-consuming court process. Assets in a revocable living trust pass to beneficiaries without probate hassles, and while probate documents are part of the public record, the contents of a revocable living trust are not.
How We Can Help
Perhaps the decision to engage in estate planning has been made. Now it is time to contact a highly experienced Maine trust attorney. Having a caring, knowledgeable estate planning attorney from Hodgkins Law by your side can be an invaluable asset.
Working with Hodgkins Law will ensure you receive individualized attention and the trust will be created for a specific family, according to their unique needs and family dynamics. While it is not something most adults look forward to, now is the time to ensure loved ones are taken care of. Contact Hodgkins Law today for all estate planning needs in Southern and Mid-Coast Maine.