During the creation of your estate plan you will need to make numerous choices, starting with what tools and strategies you plan to incorporate into your plan. One common addition to a comprehensive estate plan is a living trust. You may be wondering “ Why should I have a living trust? ” A living trust is an extremely flexible estate planning tools that can accomplish a wide variety of goals, making it worthwhile to consider including one in your estate plan.
A trust is a legal arrangement in which something of value is entrusted to a person or entity (the trustee) by the maker of the trust (you) for the benefit of a third party (the beneficiary). If the trust will become active while you are alive it is a living trust, or inter vivos trust. If the trust will not take effect until your death it is a testamentary trust. A living trust can be used for a variety of purposes, including:
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Incapacity planning
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Medicaid planning
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Asset protection
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Business succession planning
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Charitable gifting
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Special needs planning
Your living trust can be an irrevocable trust or a revocable trust. If the trust is irrevocable you cannot make any changes to the trust or revoke the trust after it takes effect. A revocable trust, on the other hand, change be modified or revoked at any time. Which type you choose to create will depend, to a great extent, on the purpose of your trust.
If asset planning is the primary purpose of your trust, for example, you will likely need to create an irrevocable trust. To shield assets from creditors the assets need to be inaccessible to you which only occurs in an irrevocable trust. If incapacity planning is your chief purpose for a living trust, however, you will likely create a revocable trust. You are then able to name yourself as the trustee and a spouse, parent, or adult child as the successor trustee. You can then transfer assets into the trust and continue to manage them as you did prior to the trust creation. If you suddenly become incapacitated, however, the successor trustee takes over control of the trust assets, providing for a simple and effective shift of control that does not require court intervention.
Always consult with your Missouri estate planning attorney when making important estate planning decisions such as whether or not to create a living trust.
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