In Virginia, a simple will is the most basic estate planning document and can be a good choice for those who have no children under the age of 18, and have uncomplicated estates.
Once you have made the decision to do some necessary estate planning, you may be a little lost as you try to determine which documents you need, as well as the differences between them. If you are including a trust in your estate plan, you may be wondering about the differences between a special needs trust and revocable living trusts. Both of these documents are trusts, which are essentially estate planning tools that that can be extremely valuable for most people to have in addition to a will.
Any type of trust is created while you are alive, and it establishes the trustee and the beneficiaries. Some trusts allow you to use the assets in the trust for your benefit during your life, then for the benefit of your named beneficiary after your death. There are, however significant differences between a special needs trust and a revocable living trust.
Special Needs Trust
A special needs trust provides for a person with a mental or physical disability, whether that person is a child, a spouse or a grandchild. The special needs trust will provide assets and resources which will take care of the person with the disability for the remainder of his or her life. One of the primary benefits of a special needs trust is that you are able to leave money or assets to the person with a disability without jeopardizing their ability to receive Medicaid and Supplemental Security Income benefits. Having cash in the bank can affect a person’s eligibility for SSI or Medicaid, however the special needs trust can offer a way around that.
Rather than leaving property or cash directly to your loved one, you leave it to the special needs trust. You will choose a trustee who will have discretion over the assets in the trust, and will be in charge of spending money on behalf of your loved one. Even when a special needs trust is used, however, the trustee cannot give money directly to the beneficiary, but goods and services can be purchased for that person. Such things as personal care attendants, physical rehabilitation costs, educational costs, recreation costs, home furnishings, vacations, and out-of-pocket medical and dental expenses can all be paid for out of the special needs trust. The special needs trust lasts for as long as necessary, which usually means the trust continues until the beneficiary dies, or the funds are entirely depleted.
Revocable Living Trust
A revocable living trust tells who will receive your property and other assets when you die. Most living trusts are revocable, meaning you can change them as you wish, however some people choose irrevocable living trusts for specific reasons.
Living trusts are generally used to avoid probate, which can be both time-consuming and expensive. Assets left to beneficiaries via a living trust can pass directly to those beneficiaries without probate. A trustee must be named in a revocable living trust; the trustee will take care of the property, and ensure your assets are distributed to beneficiaries as per your wishes.
Revocable living trusts also tend to reduce the chances of disputes regarding your estate after your death, and keep your affairs much more private than a will. It is important to note that even if you have a revocable living trust, you may also need a will, particularly if you need to name guardians for your children, leave instructions on how debts and taxes will be paid, or if you want to leave sentimental items to various people.
If you have questions regarding your estate planning, it is important that you speak to an experienced estate planning attorney as soon as possible. Contact us today to take care of your important estate planning tasks.