A living trust is one of those things that are extremely useful but often misunderstood. It has many benefits both for you while you are alive and for your heirs. Here are four things about living trusts that you may not have known about.
Some people assume that if they put their assets into a living trust, they won’t be liable to their creditors anymore. However, this is only true when it comes to irrevocable trusts; in other words, trusts which place your assets out of your reach. Living trusts are revocable, however, and since you can still access your assets if you so wish, you will usually still be held liable.
The same goes for qualifying for Medicaid. As long as you can revoke the terms of the trust and access your assets, you may be disqualified from Medicaid. Living trusts aren’t a workaround in this regard.
Living trusts have many benefits over wills, such as enabling you to avoid probate. However, you should still write a will, even if you have set up a living trust. There are some things that living trusts can not account for and for which wills are necessary. For example, if you want to appoint a guardian for your children or name an executor, you will need a will. Wills are much simpler to make as well.
Not a Quick Fix
Setting up a living trust by itself will accomplish nothing. You have to actively transfer your assets into the trust in order to avoid probate and accomplish whatever your goals with the trust were in the first place. There are so many people who set up a trust and then procrastinate when it comes to transferring their assets to it. Yes, it is a hassle, but their heirs end up having to deal with the hassle of probate after their death.
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