By Attorney Tammy A. Weber, CELA*
When it comes to Estate Planning, it’s easy to focus solely on asset protection. However, a well-crafted estate plan, anchored by a trust, can do so much more than protect your bank account – it can protect your family.
What is a Trust?
At its core, a trust is a legal arrangement where a trusted third party, or trustee, holds and manages assets on behalf of your chosen beneficiaries. Unlike a will, which only goes into effect after someone passes away, trusts can be structured to take effect before death, after death, or even in case of incapacitation.
Trusts are not one-size-fits-all; they can serve diverse purposes, from transferring property efficiently to minimizing estate taxes or even supporting a beloved charity.
Revocable vs. Irrevocable Trusts
Trusts fall into two main categories: revocable and irrevocable. The distinction hinges on whether you, as the grantor, can access the trust’s assets. With an irrevocable trust, these assets are out of reach, shielded from potential litigation or bankruptcy. It also means that should you need them; you cannot access them.
Irrevocable Life Insurance Trusts
One way that Estate Planning Attorneys can help is to create an Irrevocable Life Insurance Trust (ILIT). An ILIT is specifically designed to hold ownership of one or more life insurance policies. Once you transfer your life insurance policy into an ILIT or use the trust to purchase the policy itself, you effectively remove it from your estate, thus insulating it from the federal estate tax after a period of time. This means upon your death, the proceeds from the life insurance policy are not included in your estate for federal tax purposes. The result? These proceeds are passed to your beneficiaries without being subject to the hefty federal estate tax.
Medicaid Asset Protection Trusts
For many, Medicaid is an essential tool through which they access and pay for expensive long-term care. This is where a Medicaid Asset Protection Trust (MAPT) can be useful. A MAPT is designed to protect your wealth, enabling eligibility for Medicaid without the heartache of spending down your life savings.
Protection from Litigation or Bankruptcy
One of the biggest benefits of a trust is that they protect you and your family from life’s misfortunes. Many people hope to pass down their home to their children. If you just put the house in their name, that leaves your legacy in the hands of their future good decisions. If they have a litigious ex-spouse or need to file bankruptcy, your family home will be subject to their situation.
Why Should Someone Create a Trust?
The beauty of a trust lies in its specificity and flexibility. It allows you to dictate the exact terms of asset distribution, appoint a responsible trustee, and provide for beneficiaries in a manner that aligns with your values and their needs.
Trusts are about more than assets; they’re about ensuring your family’s security and peace of mind for generations to come. If you’re ready to get started, call one of our Certified Elder Law Attorneys at Marshall, Parker & Weber. We’ve been protecting families for decades.
Tammy A. Weber is a Certified Elder Law Attorney and the Managing Attorney of the law firm of Marshall, Parker & Weber, LLC with offices in Williamsport, Jersey Shore, and Plains. For more information visit www.paelderlaw.com or call 1-800-401-4552.