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Jan 05, 2021

A Guide to Trusts for Older Clients

Social Security

Many of our senior clients worry about properly managing their assets as they reach their late 70s and early 80s.  Simple things like paying bills and managing debt can become a concern.  They also start to worry about what will happen if their health begins to deteriorate, and they need additional support for themselves or a loved one.

To make sure that our clients’ future needs are being addressed, we like to sit down with them and a board-certified estate planning attorney to review their existing estate plan and discuss the best solutions available to them.   It is at this stage of life that we often get many questions about trusts. That’s why we’re presenting this breakdown of how trusts work and how we have seen them used by our elderly clients in their late-stage planning.

        • What Is a Trust?

A trust is legal entity that you can create either during your lifetime or upon your death.  Trusts can be broken down into two categories: revocable and irrevocable. The simple difference between the two is that, once created, a revocable trust can be amended or changed by the trust grantor, whereas an irrevocable trust cannot.

        • What Is a Living Trust?

A living trust is created during your lifetime. You can usually appoint a member of the family to manage the trust and name beneficiaries to inherit the assets in the trust. A living trust can be revocable or irrevocable; the biggest difference is that the terms and provisions of an irrevocable trust cannot be changed. In other words, once property has been transferred to an irrevocable trust, it can no longer legally belong to you. This allows assets in the trust to be exempted from estate tax after your death, since you technically do not own the property in the trust. Revocable living trusts, on the other hand, are often created to provide assistance in managing finances and avoiding elder mismanagement of funds.  Note: A living trust is different from a living will. Living wills are documents that express your wishes about being kept alive if you become terminally ill or seriously incapacitated.

        • What Is a Testamentary Trust?

A testamentary trust is created at death per the instructions in your will, and is used to appoint a trustee to distribute your assets upon your death.  The main benefit is that it allows you to specify how and when your beneficiaries can gain access to your assets.  One prime benefit of a testamentary trust is to protect the surviving spouse:  Assets are transferred into a testamentary trust upon the death of a spouse and allow the trustee to make all financial decisions regarding their assets.

If established correctly, a trust can be a powerful estate planning tool with a variety of potential tax and asset protection benefits.  No one solution is all-encompassing and every situation is unique.  It is important to be mindful of the tax implications associated with trusts and work with experienced tax and estate planning professionals well-versed in trust law and estate tax. The financial advisors of Baird Retirement Management can help make sure your estate plans are working in concert with your broader financial plans. And it’s never too late to start making an estate plan.

Since 1998, the financial advisors of The Evans Allain Crumley Group have been helping people make appropriate, forward-thinking investment and retirement planning decisions. Click here to learn more about The Evans Allain Crumley Group and Baird Retirement Management.


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