An inter-vivos trust (more commonly called a “living trust”), is a legal method for managing and distributing your assets. Unlike a will, a living trust is a private document, which means all assets placed in the name of the living trust completly avoid probate court. Wills, by comparison, are public documents. You still must go through probate court, but the associated time and expense are reduced.
How do Living Trusts Work?
A “grantor” is the person who creates the trust. He or she appoints a trustee to manage his or her assets, and the grantor can make him or herself, another person, professional, or a bank the trustee. If the grantor makes him or herself the trustee, he or she may also appoint a successor trustee, who takes over when the grantor dies.
The grantor then titles all assets of his or her choice in the name of the trust. A trust may also be revocable, which means its terms can be changed after signing, or irrevocable, which means its terms cannot be changed after signing.
Pros and Cons of Living Trusts
The pros of a living trust are that it allows a professional to manage the person’s assets, the assets are turned over to the successor trustee if the grantor becomes disabled, and records of all assets remain private.
While a living trust has several advantages, there are a few downsides too. Some of those include an extensive amount of time required to gather paperwork and setup, a fair amount of fees up-front, and a trustee who is not accountable to anyone.
If You Have a Child with Cerebral Palsy, Should You Use a Living Trust?
If you are the parent of a child affected by cerebral palsy, keep in mind that all assets he or she receives from a living trust will be factored in to the amount of government benefits he or she receives. In many cases, this would mean your child receives little or no government benefits at all, leaving your trust to cover most or all of his or her expenses.
The better solution is to create a supplemental needs trust, commonly called a “special needs trust.” If you have questions regarding living trusts or special needs trusts, contact your local attorney.