• 25
  • April
    2011

In the last post, we began a discussion on some of the basics of living trusts. Today we explore living trusts in a little more detail.

What happens with my living trust when I die?

Usually, a living trust has instructions on what should be done when the trustmaker dies. This should be a plan that gives the beneficiaries maximum benefit of the funds in the trust, and protects the beneficiaries from their creditors to the greatest extent possible.

With a living trust, the instructions are carried out without a court's involvement, unlike a will.

How much of a living trust is lost to taxes?

Most property, when transferred to a living trust, does not count as a gain for income tax purposes. The trustmaker is treated as the owner of the trust. Transferring property to a trust does not trigger a gift tax. There will be estate tax, if there is an estate tax in force when the trustmaker dies. Florida living trust attorneys can help draft a living trust and a will that will minimize estate taxes.

How would a living trust affect Medicaid?

Medicaid and other government benefit programs are going to count living trust property as available to the beneficiaries. Benefit rules should be considered when drafting a living trust.

Can a living trust be disputed?

Yes. Just as with a will, unhappy heirs can challenge the living trust's validity. With either a will or a trust, language can be included in the drafting that will discourage challenges.

Can a living trust protect property from creditors?

Creditors can still get at the living trust property while the trustmaker is alive. When the trustmaker dies and the trust becomes irrevocable, creditors can still get access to the trust property. A will provides some protection from creditors that a living trust does not.

Preparation

These estate planning instruments, living trusts and wills, are complex. No one should try to draft their own. They should be prepared by a professional, who can take into consideration the individual circumstances of the person establishing the will or trust.

Source: Colorado Bar Association "Living Trusts"