Can I Preserve Assets in a Living Trust?
A living trust offers its creator and beneficiaries a wide range of benefits, including protections from outside parties and the rigors of probate. Anyone can preserve assets in a living trust. Frequently, this is done to ensure that children, relatives and select charitable organizations receive trust property upon death.
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Identification
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Several players are involved in the creation and management of a living trust. The first is the person who establishes the trust, the trust grantor. The second is the person or group of people appointed to legally act on behalf of the property to which the trust grantor holds legal title, the successor trustee. The final player is the person who benefits from the trust, the beneficiary.
Trust Property
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For a living trust to be effective, a trust grantor must fund the trust with assets, such as real estate, automobiles, heirlooms, personal property and financial accounts. The irrevocability or revocability of a living trust is determined by a trust grantor and defined in a trust agreement. If a trust is irrevocable, it cannot be revoked once created. If a trust is revocable, it can be revoked and altered only at the request of a trust grantor or successor trustee. The difference between an irrevocable trust and a revocable trust is that the trust grantor of an irrevocable trust must relinquish complete control over trust property, and the trust grantor of a revocable trust does not.
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Protections
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A trust grantor can preserve and pass assets to heirs and future generations via a living trust. These assets are preserved from liabilities of bankruptcy or insolvency, as well as creditors in search of payment for past-due and delinquent debts. A living trust also provides a means of accessing favorable taxation treatment by providing beneficiaries with "tax-free thresholds." For example, beneficiaries of a living trust may receive a tax-free threshold of up to $6,000 for a particular year.
Limitations
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In states like Ohio, the assets held in a living trust are "countable resources" for purposes of Medicaid qualification. This means trust grantors cannot preserve assets in a living trust to minimize the bounty of their resources. Medicaid qualifications vary widely. Contact the probate court in your county of residence. Inquire if the assets held in a living trust are treated the same as if they were owned by the grantor.
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