Types of Trusts & How They Are Used
Charlotte Elder Law Attorney
Many people are familiar with the concept if trust. But few know the different
types of trusts and how they are best utilized. Although there are multiple
special-use trusts, all trusts fall into one of two categories; revocable
trusts and irrevocable trusts. To determine which type of trust you may
need, the first step is understanding the difference between the two types
Speak with a
Charlotte elder law attorney for more information!
Revocable (Living) Trusts
A revocable (living) trust allows for a technical change of ownership (from
the individual name to the trust name) but does not alter the control
the individual has over the property. All assets held in the name of the
revocable trust are completely accessible by the grantor (person creating
the trust.) Instead of being titled in the name of John Doe, the assets
are titled in the name of the trust (ex. John Doe Living Trust.)
In this situation, John Dough can still withdraw funds, sell the property
and do everything with the assets that he could while they were in his
individual name, but instead of acting as an individual, he is acting
as the trustee (administrator) of the trust. If at any point, John wishes
to dissolve the trust or move trust property back to his individual name,
he is free to do so.
A living trust is frequently used as a means of avoiding probate. Rather
than having property distributed under the terms of a will at John Doe's
death, the property remains in the trust to be distributed according to
the terms of John dictated when setting up the trust.
An irrevocable trust is one in which the grantor (person creating and funding
the trust) cannot access trust assets. Rather, the grantor places assets
in the trust and designates lifetime beneficiaries who are allowed to
access the trust property during his lifetime, as well as terms for distributing
property at his death.
At first, this may sound counterintuitive as John loses the ability to
personally utilize, sell or in any way disturb his property. This restriction
is what makes this trust useful for Medicaid planning. Property that is
held in a properly designed irrevocable trust is not countable for Medicaid
purposes. So although Medicaid requires the applicant to have no more
than $2000 in assets to qualify, the applicant can have unlimited property
in the irrevocable trust because that property is not deemed to belong to him.
There are numerous rules that must be followed when designing an irrevocable
trust and many factors to consider. The timing of the transfer of property
to the trust is extremely important. Executed properly, however, the irrevocable
trust is one of the best ways to protect and preserve assets in the event
that an application for long-term car Medicaid becomes necessary.
Let Our Charlotte Elder Law Lawyer Help You
Trusts can play an important role in long-term care planning, but should
be carefully considered and utilized in conjunction with a well-developed
comprehensive plan. Kelli Y Allen Elder Law will gladly assess your situation
and recommend how trust creation may be beneficial for you.
Contact our offices today for a