WHEN SHOULD YOU HAVE A TRUST?

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It’s appropriate to have a trust in a lot of different situations but the two types of situations that we encounter in which people most typically have a trust on, is when its appropriate for them to have a living trust and when its appropriate for them to have an irrevocable trust, in our office we call this a Medicaid trust. Lets talk about the living trust first. A living trust is a probate avoidance vehicle that can not only help reduce or eliminate federal estate taxes but it also reduces the fees, delay, and publicity of the probate process. A living trust is an instrument that is your set of instructions that tells the world what to do with your assets if you can no longer handle them yourself, whether due to your incapacity or death. You are the trustee and sole beneficiary of this trust. You can change it at anytime. You coordinate all of your assets so that the trust controls them. As a result, you bypass probate. This greatly reduces the fees, delay, and publicity of that awful process. It saves your family a lot of money and makes the process much faster and easier. Since probate is a government process, and Ohio has one of the strongest open records laws in the country, this also eliminates the public access to your records. Therefore, some criminal intent on taking advantage of your beneficiaries that are inheriting from you cannot see who is inheriting and what they are getting. A trust also protects vulnerable beneficiaries. If, when you die, one of your children is in a divorce, bankruptcy, or has developed a gambling problem or a drinking problem, then the trust has language that empowers the trustee to hang on the distribution, wait until the danger passes, then give them the money. A will cannot give them this kind of protection. In addition, a living trust can help to reduce or eliminate federal estate taxes. The other type of trust we use frequently is a Medicaid trust. It is designed to protect assets of a person entering a nursing home. It is a safer alternative than giving the assets directly to the son or daughter. If that child dies, then those assets enter probate and could be lost to a spouse, grandchildren, or creditors. Or if that child gets sued or files bankruptcy, or if they divorce, then those assets are at great risk, but if they are inside of the Medicaid trust, then they are better protected and more likely to be available to pay the expenses of the parent entering the nursing home.