Trusts – yes most of us should have one. It is not something only for the super-wealthy. A trust allows us to build our own vault and privately, set the terms and conditions under which assets in that vault are distributed to the people of our choosing (beneficiaries) after a certain event happens. Trusts are either revocable or irrevocable.
With my older clients, I often hear “I want to protect X.” Generally I hear this after they’ve heard an ad on the TV or radio about one or more government agencies making an attempt to “claim” that asset.
Revocable trusts don’t provide that level of protection during our lives b/c as it sounds, revocable trusts can be changed by the person who sets it up (Creator/Donor/Grantor). Our vault door stays open during our lives and the stuff in the vault is still ours (for good or ill).
Irrevocable Trusts, on the other hand, are locked from the get-go. They are also separate entities (like a corporation). Once that document is signed, “you lose control of [the] property transferred to an irrevocable trust.”
Some more bogies for Irrevocable Trusts, “[if] your child ticked you off…too bad, he/she is permanently a Beneficiary.”
Many people set these up to avoid paying estate taxes. That is the tail wagging to dog b/c if “[e]state tax exemptions have increased, and your estate is no longer estate taxable…sorry, you can’t reclaim the asset.”
If your financial circumstances change after the trust is established and you “[w]ant to receive more trust income or want your Trustee to sell your current house and upgrade to a larger one…the Trustee, not you, is the person who gets to decide what happens to trust property.”
Irrevocable trusts can be useful, for instance, is a beneficiary eligible for government benefits, or do we need to shelter an asset and protect it from possible creditor claims from the outset? Most of us don’t need that kind of trust muscle. Let’s work together and figure out the “why” before we build the “what.”