Often, a person creates a trust as a way of passing assets on to their beneficiaries. There are many benefits to this, including the fact that assets in a Lexington trust are not subject to estate taxes. This is also a way of placing assets in a protected account that cannot be touched during the probate process, which means the funds cannot be used to pay off the estate’s creditors. There are a number of different types of trusts you can create, and the creation process is often relatively simple.
Living Verses Testamentary Trusts
Most trusts created in Lexington, Kentucky usually fall into one of two categories: living or testamentary. Living trusts, which are not subject to probate, are created while a person is still alive. A testamentary trust, on the other hand, is created by a person’s will and only comes into being upon their death. Because it’s created at death, it is considered a part of the estate and will be subject to probate, which of course is not ideal.
If you create a living trust, you will have the option to draft it as either a revocable trust or an irrevocable trust. If the Lexington trust is revocable, as trustee, you will retain full control of the trust and can make changes to it at any time. If the trust is irrevocable, changes typically cannot be made to it. An irrevocable trust can usually only be changed if all of the beneficiaries listed on the trust agree. Irrevocable trusts are often used as a way to help the grantor qualify for Medicaid to cover long-term care costs.
Other Types of Trusts
There are a variety of other types of trusts that are more complicated and are usually only used in specific situations. Here are three of the most common:
- Credit Shelter Trusts, sometimes called a family trust or a bypass trust, are designed to provide married couples a way to pass assets equal to the amount of the estate-tax exemption. The rest of the estate can then be passed on to your spouse without paying any taxes on it.
- Special Needs Trusts are a way of providing those who are disabled with the money they need to support themselves. These trusts usually have specific guidelines regulating how the money can be used so that they do not disqualify the beneficiary from other types of support, including government benefits.
- Spendthrift Trusts pay the beneficiary a set amount of money per year. The beneficiary is not able to access the entire account when they desire. Sometimes, they may later be able to draw upon all of the assets left in the trust, possibly when reaching a specific age.
Creating a Trust
The first thing to do when you want to create a trust is to find a lawyer who understands how the process works. At Wiggins & Hall Law Group, you and our attorneys will then sit down and create the rules that will outline how the Lexington trust works. This includes the purpose of the trust, a initial and contingent trustees, and who the beneficiaries are. The trust will also go into detail about when the beneficiaries have access to the trust and who can add assets to the trust. Once a document containing all of this information is finished, the final step is transferring the appropriate assets into the trust.
Do you have questions about creating a trust in Lexington? Contact our team at Wiggins and Hall Law Group to get started today.