When Jimmy and Francis (not their real names) came to us to get their estate planning in order, Jimmy was in the early stages of Alzheimer’s Disease. They said nothing would give them more peace of mind than having a trust in place to ensure their stuff is divided correctly and transferred to their five children and eight grandchildren when they die or become incapacitated. Francis knew that if something happened to her, Jimmy would need help managing the finances. The only problem was that they had heard of revocable trusts and irrevocable trusts, but were struggling to make heads or tails of either one.
Luckily, they came to the right place. Estate planning and the documents that go with it (wills and trusts being two) can seem complicated when you don’t deal with them every day. To further complicate things, there are many different types of documents that are called trusts. Each of them has a different purposes. It can feel even more overwhelming when you are facing a diagnosis such as Alzheimer’s. Time is of the essence, so let me break it down.
First things first—what is a trust?
A trust legally transfers property or assets to a trustee, who then manages the property for the trust’s beneficiaries. Trusts enable the person creating the trust (trustor — in this case, Jimmy and Francis) to determine who receives what benefits from the trust and when. Trusts are becoming more common now that people are beginning to realize they are not just for the super-wealthy. Remember, the term “estate” simply refers to everything you own – whether it’s $1 or $50,000,000. Trusts also offer the ability to name successor trustees and cover disability and incapacitation.
Now for the nitty-gritty, and this is something that I go into more detail about in my book, You’re not Alone: Living as an Alzheimer’s Caregiver. Trusts are either living trusts or testamentary trusts.
Living Trusts — Established during the trustor’s life.
Testamentary Trusts — Take effect when the trustor dies.
If a living trust is created, the trustor can then choose between revocable trusts and irrevocable trusts.
The biggest thing you need to know about revocable trusts is that they allow you to maintain control over any assets held in the trust. This includes taking all the property back, thereby ending the trust.
Revocable trusts offer the following benefits:
- Asset management during your lifetime
- Passing assets to your beneficiaries upon death without the need for court involvement
- Allowing the person you have chosen to take over without court involvement if you become incompetent.
Irrevocable trusts appoint someone other than you to be in control. Once an irrevocable trust has been executed, it cannot be modified or terminated. Also, the assets are considered to be separate from your other assets and not included in your estate. It is hard for most people to give up that much control before they die or become incapacitated, but there are distinct advantages to irrevocable trusts. One of these advantages is asset protection from long-term care expenses, creditors, and lawsuits. Assets in revocable trusts are not protected from these during your lifetime. This can be extremely important for those with Alzheimer’s as well as their caregivers.
Call Leigh Hilton PLLC today!
At Leigh Hilton PLLC, our goal is to protect and preserve your most valuable assets while also educating you and your family every step of the way so that you feel empowered and can confidently embrace your estate planning strategy. We have ample experience with revocable and irrevocable trusts and will take into consideration your particular situation. Leigh Hilton PLLC wants to be your first call every time for any estate planning need. We look forward to serving you.
Thanks for reading!