James S. Rizzo, Esq.
Whether or not assembly teams throughout property planning seminars or purchasers individually, I’ve discovered there’s a normal misunderstanding of trusts and their many advantages. Far too many individuals suppose trusts are for “others” once they may be ultimate candidates for a belief to guard their belongings and keep away from probate once they move away. The next are the commonest misconceptions:
“I don’t want to lose control of my assets.Doesn’t someone else control the Trust?”– Reply: Not essentially. Whether or not you’re establishing a Revocable or Irrevocable belief, you will have the choice to be the Trustee (the one who manages the belief) and you’ll select different Co-Trustees, if any, to serve with you. Frequent decisions for Co-Trustee(s) are a partner, youngster and/or different trusted individuals.You additionally select who your successor trustees are;i.e., these individuals who will take over the belief in case you turn out to be incapacitated and upon your demise.
“Trusts are for rich people.There is no point in creating one if I’m not a millionaire.”Reply: False. Usually, in case you personal property, have life insurance coverage and/or produce other belongings which complete over $150,000 (together with life insurance coverage and actual property), you’re a candidate for asset safety. The kind of belief you arrange will in fact differ relying in your age, normal well being, quantity and kind of belongings, life-style and targets. For example, a wholesome particular person between the age of 18 – 55 with a considerable amount of life insurance coverage and/or different belongings would usually be a very good candidate for probate avoidance and tax safety utilizing both a Revocable Residing Belief or a Will containing a Testamentary Belief. Nevertheless, an individual over 55 who has well being points or fears the potential for nursing dwelling care, can be extra of a candidate for an Irrevocable Medicaid Belief to guard belongings towards ever escalating nursing dwelling prices, along with probate and tax avoidance.
“I don’t want to put all my assets into a trust and not have money to live and enjoy retirement.”Reply: You don’t must! A well-crafted property plan will stability and consider your life-style, bills, targets and future wants and desires. You additionally retain extra flexibility relying on the kind of belief you arrange. A Revocable Residing Belief usually lets you proceed to make use of and entry any belongings, as these trusts are primarily arrange for tax and probate avoidance functions versus nursing dwelling and creditor safety.
An Irrevocable Medicaid Belief, alternatively, is designed to insulate your belongings from nursing dwelling prices however it additionally restricts you from taking the principal belief belongings again immediately. Nevertheless, the “win-win” characteristic is that any belongings inside these trusts can be utilized to fund prices and bills of actual property additionally inside the belief, comparable to mortgage funds, taxes, furnace and roof repairs, additions, and so on. An Irrevocable Medicaid Belief ought to be set as much as go away sufficient belongings outdoors of it so you possibly can have an energetic retirement and preserve no matter hobbies or pursuits you at the moment take pleasure in. Property left outdoors the belief may be considered as your “mad money” to take care of your life-style, on high of pension, Social Safety, IRAs or different revenue you will have. Usually, the first belongings to enter an Irrevocable Medicaid Belief are extra passive, comparable to actual property, life insurance coverage and different funds not relied upon for on a regular basis residing, enjoyment and retirement.
“Can my youngsters or different beneficiaries take belongings from the belief?” Reply: Usually no, until you particularly identify them as a Trustee with that energy. Nevertheless, most frequently, the Trustmaker (the particular person creating the belief) retains management over what belongings, if any, may be gifted throughout that particular person’s lifetime. The Trustmaker may also impose restrictions on belongings being distributed after demise by things like making the minimal age for minors to inherit 25 or 30 years outdated. If no age is established, an 18 12 months outdated stands to inherit at demise which generally is a recipe on your hard-earned belongings to be rapidly dissipated. Additionally, if you already know a beneficiary is financially irresponsible, suffers from a incapacity, bodily ailment or has drug, alcohol or playing points, you possibly can impose additional restrictions in your belongings or appoint further trustees to supervise funds going to that particular person.
Misconceptions apart, the essential factor to remember when assembly with an property planning lawyer is that trusts ought to be crafted and customised to fit your particular person wants. You ought to be cautious if an lawyer affords a “one size fits all” or “simple” sort of belief. Everybody has totally different levels of belongings, distinctive household conditions and/or well being points. Trusts ought to be fastidiously crafted to handle all of those conditions whereas supplying you with peace of thoughts that your belongings will probably be protected and your family members supplied for if you find yourself gone.
* This text is for informational functions solely and shouldn’t be construed as authorized recommendation. James S. Rizzo is an lawyer with the legislation agency of Rheinhardt and Bray, P.C., with places of work in Rome & Ilion, NY and serving the CNY space.He has over 24 years of authorized expertise and concentrates in Property Planning issues, together with Wills, Revocable and Irrevocable Trusts, Powers of Lawyer, Well being Care Proxies, Asset Safety, Medicaid/Nursing House functions & associated issues.He may be reached at 315-339-0503 or [email protected] for a confidential preliminary session.Go to us on the internet at: www.CNYElderLaw.com.
Final Revised: Might 18, 2020.