A common estate planning misconception harbored by many people is the idea that you lose direct personal control over assets you sign over to a trust. Since they want to use the resources if necessary, they instead create a simple will to satisfy their estate planning needs.

In this post, we will dissect this assumption so that you can make informed decisions.

Irrevocable Trusts

Some trusts that cannot be revoked once they have been established. If you create an irrevocable trust, you probably cannot change the terms. Also, as the grantor of the trust, you may not be able to act as trustee, or manager, of the trust.

In a legal sense, you would be “surrendering incidents of ownership” when you conveyed assets to this type of trust. It can seem disconcerting to let go of control, but there are reasons why some people choose to do so.

Think about it. Many elders require nursing home care late in their lives and Medicare will not assist with these costs. Since nursing facilities are very expensive, this is a big deal. Medicaid will pay for long-term care, but it is a needs-based program, so the value of the assets you can keep is quite low.

Assets held by an irrevocable trust are not counted against this asset limit. This is one reason why people establish them. High net worth individuals are also concerned about estate tax and resources conveyed into this type of trust would not be part of their estate.

These are a couple of reasons why people use trusts that cannot be revoked, but there are a number of others.

Revocable Living Trust

The most widely utilized trust in the field of estate planning is the revocable living trust. As the name indicates, you can amend or revoke this type of trust. This means you could not use a revocable living trust to qualify for Medicaid or to mitigate your estate tax exposure.

You can be the trustee and beneficiary of this trust while you are alive and well, so you have direct access to all assets in the trust. In a real sense, nothing changes regarding your ability to immediately use assets owned by the trust.

There are many reasons why people use these trusts. For some, probate avoidance is at the top of the list. Probate is a costly and time-consuming legal process that takes place under the supervision of a court.

A will must be admitted to probate, but assets in a living trust are distributed without court intervention. You can protect a spendthrift beneficiary by including spendthrift provisions that allow for limited distributions over an extended period of time.

If you are married, you and your spouse can establish a joint living trust to simplify things in a number of ways.

You can provide protection against your own incapacity in a living trust by naming a successor trustee to assume the role if necessary. The estate administration process is very efficient because the trust owns all the assets that comprise the estate.

Take Action Today!

You have options when planning your estate. The ideal course of action will depend upon your individual circumstances. We have the expertise to guide you in the right direction.

We are here to help if you want to put an initial estate plan in place or change an existing one.

You can schedule a consultation in Oklahoma City or Tulsa by calling 405-843-6100, or in Overland Park, Kansas by calling 913-385-9400. You can also send us a message through our contact page if you would like to reach out electronically.