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Tampa Estate Planning Attorney > Blog > Business Law > A Living Trust Could Be The Right Tool For You–Even if You’re Not Rich

A Living Trust Could Be The Right Tool For You–Even if You’re Not Rich

When we talk about trusts, there is a misconception that they’re only for the very wealthy. Terms like “trust fund baby” have created the impression that the average middle class person doesn’t need to worry about trusts. But living trusts can help everyone, and can give you some peace of mind in planning your estate.

The Benefits of Living Trusts

Let’s pretend that you and your husband have kids from other marriages. Both of you have wills leaving your stuff to each other, then to both your kids, equally, upon the death of the other spouse. You die first, and all your stuff goes to your husband. But then, before he dies, he changes his will to exclude your kids. Thus, your kids get nothing.

He has every legal right to do that. But a living trust could have prevented that situation.

A living trust allows you to put money or assets in a trust, and the trustee who you appoint to manage the assets, must abide by the rules of the trust. The property in trust does not necessarily revert to your wife on death, and thus, the provisions you put on the trust become irrevocable upon your death. Those assets are also not included in any probate action that may be needed to administer your assets by a court.

Another advantage to a trust is that it allows a trustee to manage the funds if you become disabled. Assume you have a sensitive family situation and, for some reason, you are uncomfortable with your spouse having full control over certain assets should you become disabled. The trustee can do that, pursuant to the express wishes of the trust.

The Limitations of the Living Trust

Its important to remember that a living trust is not an asset protection device. Because you can withdraw from the trust and even revoke it, the funds are still considered yours, and thus subject to creditor claims upon your death. However, certain provisions, such as spendthrift clauses, can be used that can put certain assets out of reach from creditors.

The revocable trust also won’t prevent a spouse from taking an “elective share,” a legally mandated minimum of 30% of your estate that goes to a surviving spouse. So, people with estranged or separated spouses but that are still legally married will need to do a bit more than just set up a revocable trust.

The decision to transfer assets into a living trust is an important one, and in many cases, it may not be a good idea to do so. For example, transferring property that’s already exempt from creditors, such as a homestead, or property jointly owned with another, could have the opposite result as you might want, eliminating the exemption and exposing an asset to creditors.

Every personal situation is different, and managing your assets is a personalized job. Contact Tampa business and probate attorney David Toback to discuss your needs and make sure your property is safe and your requests are met.

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