Can smaller estates benefit from a living revocable trust?

A living revocable trust is not only for estates with a lot of money. In fact, estates with fewer assets may have even more reason to utilize this probate avoidance procedure than wealthy estates. A living revocable trust with an incapacity clause can spare an estate both the expense of court involvement and an executor’s fees.

The reason that a living revocable trust does not have to go through probate is because an individual took the time during his or her lifetime to transfer/retitle assets to a trust. Probate, in general terms, is simply a legal process by which the court transfers assets to the beneficiaries designated in an individual’s will.

The terms of a trust can be very flexible. For example, married couples have the option of combining their assets in a living revocable trust to reflect 50/50 ownership. Alternatively, a trust can also keep assets separate from one’s spouse.

There may also be special situations. For example, parents who have a special-needs child or a child who is developmentally disabled may be interested in a type of irrevocable trust, called a special-needs trust, that will last for the child’s lifetime. Ideally, the assets in that type of trust not make the child ineligible for public benefits.

A living revocable trust does not protect an individual’s potential eligibility for need-based Medicaid. Individuals who want to pursue that feature may turn to an asset protection trust, which is generally irrevocable. However, an individual may prefer to retain control over his or her assets, and Medicaid may also not be the most desirable option to pursue. Many of our clients prefer to plan for private assisted living centers or nursing homes, for example, rather than government managed Medicaid facilities, which can be very basic.


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