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A Living Trust is created during your lifetime and is funded with most or all of your assets by simply re-titling the assets to yourself as trustee. In other words, the individual who creates the trust (the grantor) is usually also the initial trustee who will retain control of all of the trust assets until his/her death. Successor trustees are also named so that if the grantor becomes incapacitated, the successor trustee will manage the trust assets for the grantor’s benefit, until death. Upon the grantor’s death, the successor trustee follows the terms of the trust and distributes the trust assets to the trust beneficiaries. The “bottom line” is that you are still in control of all of your assets under your trust, so you continue to enjoy all the present benefits of your assets.
Also, a living trust is revocable during your lifetime, which means that you can re-transfer your trust assets back to your name if desired, without adverse tax consequences. A revocable living trust does not restrict you from managing your assets; for example, you can continue to buy, sell, borrow, make gifts, etc. Since a living trust is revocable, you will continue to file your income tax returns as you normally would; there are no additional separate tax returns to file and while you are alive, all trust income is reported under your social security number.
An Irrevocable Living Trust is a trust that cannot be amended or changed after it is set up. A person would give up ownership of real property or other financial assets by transferring those assets to an Irrevocable Trust to be managed by a Trustee. Irrevocable Trusts are used for:
1. Gifting your residence to your children and having peace of mind that you can continue to live at your residence without any problems from your in-laws , should your children get divorced or die before you;
2. Protecting your residence from a Medicaid Lien; and
3. Protecting your residence from creditors because you no longer have control over your residence.
You lose control of your assets transferred to an Irrevocable Trust, so it is important that the Trustee you name is trustworthy and responsible. This requires a lot of thought, and when you have the right Trustee, you will have the peace of mind knowing that the Irrevocable Trust will give you much protection.
We can work with you to determine if an Irrevocable Trust will suit your wishes and needs.