Many of the laws governing trusts are more complex than the laws governing Ohio wills and the probate process. This is because trusts allow you to do far more than you can with a will and trusts are not only used at death. Some trusts operate while you are still living.
We have assisted clients who have the sole goal of using trusts to avoid the probate process entirely. However,mostpeople use trusts to enhance their estate plan to accomplish specific goals that may otherwise be more complicated or costly if handled through a probate estate.
What is a Trust?
A trust is a fiduciary agreement between you and your trustee whereby the trustee holds and manages the property of the trustee in compliance with the terms of the trust. Because trusts can be arranged in many ways, some trusts can and do avoid probate unless the trust specifically states to transfer all assets to your estate upon your death. Trusts are very appealing to some individuals because they see trusts to avoid probate, save money, save time, protect assets from creditors, and basically keep other people, the court, and the state out of their business.
In summary, the benefits of a trust include:
- Retain control of wealth
- Protect assets from creditors
- Provide for the upkeep of beneficiaries
- Protect your estate from the creditors of heirs
- Avoid probate
- Reduce or eliminate estate and gift taxes
- Disburse property to heirs efficiently and effectively without time constraints of the probate process
- Stipulate conditions for beneficiaries to receive dividends and distributions
Because trusts are flexible and varied, trusts are an excellent estate planning tool that can accomplish a variety of goals in an efficient manner.
Types of Trusts
Because trusts are flexible, there are numerous types of trusts that do everything from provide for your child’s college education and funding a charity to providing for the care of your dog after your death. A trust can accomplish almost any goal. Therefore, it would be impossible to discuss each type of trust in one post.
We are going to discuss the major difference between various trusts below and urge you to contact our office to speak with an attorney. Our attorneys provide additional information on specific types of trusts that meet your needs, including the pros and cons and benefits and risks associated with each specific trust.
Irrevocable vs. Revocable Trusts
Whether your trust agreement is irrevocable or revocable is a huge distinction, maybe the most important distinction.
An irrevocable trust transfers assets into the trust, and the trust cannot be altered. You cannot transfer the assets back out of the trust if you change your mind or your circumstances change. Once you establish the trust and transfer the assets into the trust, you cannot “undo it” or change the terms of the trust. This may sound harsh, but irrevocable trusts do have benefits.
- Minimize or eliminate estate tax
- Higher degree of protection of assets from creditors
- Provide for minors, people with disabilities, children with special needs, or anyone who is financially irresponsible with their personal money
- Avoid the probate process
- Can be useful in Medicaid and nursing home planning
- Can provides cash flow for you and the beneficiaries
- Securing assets for an heir so that the assets won’t interfere with applying for Medicaid or SSI
Revocable trusts are also referred to as living trusts because it allows you to retain control over your assets during your lifetime, but the property in the trust bypasses probate upon your death. This type of trust is more flexible than in irrevocable trust, and it can be dissolved, or the terms can be modified at any time by the grantor. Because you can name yourself as trustee, you can truly manage your assets while receiving some of the benefits a trust offers. During your lifetime, the interest earned on the property within the trust is paid to you. Upon your death, the property in the trust is transferred to your beneficiaries.
Some of the benefits an irrevocable trust has that a revocable trust does not have to include the ability to avoid estate taxes and the high degree of protection from creditors.
Call a Centerville Trust Attorney for More Information
Choosing the correct type of trust for your situation can be challenging and overwhelming. Especially if you don’t have an attorney who does not have estate planning experience in addition to understanding the various types of trusts and the laws governing trusts.
Contact Lovett & House by telephone at (937) 429-7730 today to schedule a time to meet with one of our experienced Centerville trust attorneys. Get the facts about trust agreements from some who understand the law and who you can trust — the attorneys of Lovett & House.