A Revocable Living Trust is a valuable estate planning tool that’s designed to allow you to avoid probate, but there are some things that you may be surprised to learn about this popular type of trust:
- A Revocable Living Trust will not help you protect your assets from creditors. This is true during your lifetime and after your death. Because the trust is revocable (meaning you keep control and can take back the property at any time), the law says that your creditors can get at the trust assets while you’re alive. After you pass away, assuming all of your property is in your trust, then the property will be distributed through the trust and there will be no need for probate. If you’re concerned about creditors, this may not be such a good thing. This makes no sense..a trust can file a notice to creditors and get the same 4 month period. If it does nothing, it still has protection, but the claims period is 4 years instead of 4 months. The concept here is old law that’s been changed for at least 10 yearsThe probate process offers at least a little bit of protection from creditors. When you probate a Will, creditors have a deadline for filing their claims against the estate. If a creditor misses a deadline, they lose the right to collect on the debt forever.
- A Revocable Living Trust does not do away with the need for a Will. This may seem strange, since the whole point of the trust is to avoid probate, but if you have a Revocable Living Trust, you need a special kind of Will called a Pour-Over Will. A Pour-Over Will serves as a catch-all for any property that may have been left out of the trust before your death, and places it in the trust when you die. This way, you make sure that all of your property ends up where you want it to.
- A Revocable Living Trust will not help you avoid nursing home costs. Because the trust is revocable and you can end it at any time, the government counts all of the trust assets as your personal assets for purposes of determining whether you’re eligible for Medicaid.
A qualified estate planning attorney can help you determine whether a Revocable Living Trust is right for you, and can help you put together a comprehensive estate plan that will help you address all of the concerns you might have.
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