Revocable Living Trust Considerations: A few things a Living Trust does not do

Creating a living trust is generally considered the best choice when managing your estate and the way that your assets are distributed among beneficiaries. While living trusts do offer many significant benefits, they may not actually accomplish everything you want. In fact, there are some drawbacks to consider when creating a living trust in place of a will or without a corresponding pour-over will. We can help you decide how to strategically approach Estate Planning so it accomplishes all of your goals.  Please consider these issues that arise when creating a living trust alone.

You Can’t Nominate a Personal Guardian for Minors

One of the main reasons why people choose pour-over wills in conjunction with living trusts is because the latter doesn’t allow them to nominate a personal guardian for minor children. This is a situation where setting up a living trust and either separate nominations of temporary and permanent guardians or using a pour-over will is a great idea. We can help you have a living trust and will acting in conjunction with each other.

Control Over Medical Decisions

While a living trust does a fantastic job of giving you control of your assets, it doesn’t do the same for medical decisions. The only control you will receive in terms of medical decisions with a living trust is to inform others what choice you want to be made for life support in case of terminal illness. However, the medical decisions end there. A good solution to consider is to prepare healthcare powers of attorney (aka healthcare proxy), HIPPA Authorizations and an Advanced Directive.

Living Trusts Don’t Function with Medicaid

Medicaid is a federally funded healthcare program that is designed to provide healthcare services for those who are in need. If you choose to create a living trust, you will no longer qualify for this medical benefit. It’s best to consider attorney counsel so that you know the exact number of assets you can have in order to still benefit from similar services.

You Still Need to Report Your Yearly Income

Even though setting up a living trust means that you are transferring assets to the Trust to eventually be distributed to beneficiaries, this will have no effect on your income taxes. You still need to report your yearly income and pay taxes. This is required for as long as you use your Social Security Number on the income tax return document. It’s important to mention that a different tax identification number and tax return will be used for the trust after death. This is one of the ways that trusts can save money on income taxes.

Your Assets Will Not Receive Protection from Creditors

Living trusts are sometimes used to transfer assets and avoid your family having to deal with Probate. However, setting up a living trust doesn't mean that your assets are protected from creditors, at least while you are alive. Living trusts give you control over your assets and, therefore, are reachable by judgement creditors.

These are some of the considerations to think about when deciding the best approach to your wholistic Estate Plan.  We are here to help.