By Libby Banks, the Law Office of Libby Banks, PLLC
There are several different types of trusts we use when doing an estate plan. The primary trust we use in estate planning is the Revocable Living Trust (“RLT”). It is the foundation of most estate plans and has many benefits. It contains instructions for managing the assets in the trust during your life, upon your death, and if you become incapacitated.
The RLT will also avoid the need for a probate court proceeding on your death. You can select the person(s) who will be able to step in quickly to gather, sell, and distribute your assets to your beneficiaries without a court’s involvement.
We sometimes create irrevocable trusts for specific purposes. Most of them involve someone else serving as the trustee of the irrevocable trust – meaning transferring property out of your hands and out of your control.
There are four primary uses for irrevocable trusts. One is estate tax avoidance. Estate taxes – or inheritance or death taxes as they are sometimes called – are calculated based on what you own (your “estate”) at your death. To avoid estate taxes, you might create a trust and transfer some of your property out of your estate and into another person’s estate (your children’s, for instance) to avoid or minimize estate taxes at the time of your death.
An irrevocable trust can also be created upon your death to benefit a spouse in a blended family situation. This irrevocable trust can be used to care for your current spouse during his or her lifetime, while assuring that at your current spouse’s death, your children from your previous marriage receive what remains of the assets in the trust.
Asset protection trusts are another common irrevocable trust, designed to avoid creditors and protect assets. An RLT does not provide asset protection. This asset protection trust needs careful and considered planning. It must be created in advance of any trouble on the horizon. If you already have a claim coming down the pike, it is too late to start asset protection planning.
An irrevocable trust can also be established for someone who is receiving government benefits such as Medicaid or trying to protect assets while qualifying for Medicaid long term care services.
Another trust is a pet trust. These are designed to leave money for the care of your pets after your death. The wealthy often use them, but if you have long lived or expensive pets – parrots, tortoises and horses come to mind – a pet trust might be just right for you.
I would be happy to assist you with creating a trust for your needs. Call our office at 602-375-6752 for a free consultation for your estate planning or check out our website at libbybanks.com.