In a trust, a designated trustee becomes responsible for managing the property and other assets owned by the trust.
During the grantor’s lifetime, he or she creates a Trust and then must transfer ownership of their assets into it. These assets are then managed by the named grantee, and upon the grantor’s death, pass according to the directions contained within the document. However, many people do not need or want this form of estate planning.
An RLT can potentially:
In certain situations, a living trust may be a useful estate planning option.
However, in the majority of cases, the costs incurred creating and administering a living trust outweigh any potential benefits or savings.
If properly drafted and if the person’s assets are transferred into the trust they eliminate the need for an estate. A trust can be written so that assets will be distributed immediately upon your death or portioned out over specific periods of time and in specific amounts.
When necessary, revocable living trusts can also contain tax planning.
But that does not mean these documents are the answer to all problems. Many mistakenly believe that a Revocable Living Trust will:
No. This document normally does not preempt any court proceeding.
No. Your Trust can be revoked at any time while you are alive. Therefore, the assets in your RLT are subject to your creditors and available to pay for the cost of nursing home care.
No, you must re-title your assets into your Trust for them to avoid passing through probate. A failure to do so could mean those assets become part of your estate.
No. The preparation and administration of this type of trust is often an involved and expensive process.
Yes. A Revocable Living Trust may not include all of your assets and does not contain medical instructions, nor grant the authorities found in a Power of Attorney.
No. Taxes are paid on the income generated by the assets in the Trust and that income is included on your personal tax returns.
No. The assets in the Trust are included in the calculation for estate tax purposes.
No. You may name beneficiaries on your assets. This includes:
These designations allow assets to pass directly to the person(s) of your choice upon your death, bypassing probate.
No. Financial Powers of Attorney allow your Attorney-In-Fact (named agent) to manage your financial affairs and property. POA’s are usually less expensive to create and administer as well as normally less cumbersome than RLTs.
Mr. Abraham is an experienced attorney and founding member of the Law Firm of Abraham & Bauer. The Towson, MD office of the firm concentrates its practice in Estate Planning, Elder Law, Probate, Medical Assistance (Medicaid), Guardianship, Asset Preservation and Fiduciary Representation.
He is an active member in a number of professional organizations that focus on law, the senior community, and estate planning. He works with clients in Central Maryland, especially in Towson, Hunt Valley, Lutherville/Timonium, Parkville, White Marsh, Bel Air & Northern Baltimore City.
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