Trusts – Do You Need One…..and what are they???

They’re named trusts for a reason, because you better trust the person you put in control of it.  So who’s in control?  You for a Revocable Trust, and the person you name as trustee in an Irrevocable Trust (typically the eldest kid or the child that’s most responsible). 

Do you trust yourself?  For purposes of protecting your assets for you and your family, I imagine yes.  So is there a downside to not being able to name yourself as trustee of an Irrevocable Trust?  Not really (in my opinion). 

            All trusts are used to save your family time, money and aggravation. They’re a tool to streamline the passing of assets upon your death.  Revocable Trusts are primarily used to avoid probate and also prevents the possibility of any Will contest (should you have a concern or not, it comes with the RT). Without question, I’d recommend RTs for out-of-state assets, like a condo in FL because then at least your family doesn’t have to probate in FL and NY.  If you have any concern of a Will contest, then obviously I’d absolutely recommend it.     

            Irrevocable Trusts have many of the same benefits of RTs (avoid probate and Will contests, and save your family time, money, and aggravation), but the IT takes it a giant step further; it can protect an entire estate (home, brokerage accounts, investments, etc.) from a possible future Medicaid lien, or for that matter any judgment, including personal injury lawsuits, medical debt, etc.           

I’m going to get an Irrevocable Trust when I’m about 75 years old.  I think that’s a pretty good time for it, but it’s actually never too late.  Because even if you don’t satisfy the lookback (5yrs for Nursing Home Medicaid and about 2 yrs for At-Home Community Care Medicaid), the closer you get the better; long story short, each month you get closer to satisfying the lookback saves you about $20k that Medicaid could otherwise lien against your property.   

So what’s the downside?  If you ever wanted to sell the home, your trustee would have to do what you entrusted them to do; follow your requests.  That includes signing the listing agreement with a realtor, the contract of sale, and appear at the closing to sign all of the documents needed, and finally, collect the checks.  If you chose your eldest child, or one that you felt is most responsible, and for some unforeseen reason they don’t do what you’d like (a spouse is yacking in their ear about how it shouldn’t be sold now), you can simply fire them, and name another trustee. 

There are other factors involved with trusts, but these are the main ones. When a client has a clear objective and fully understands all of the pros and cons, it can be an excellent tool to preserve their estate and save their family time and potential aggravation.