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Which assets should individuals list in a trust?

Recently retired individuals living in Florida may want to consider the possible benefits of establishing a living revocable trust. A living trust may partially substitute for a will, as it will become irrevocable and dictate the distribution of the listed assets at the time of the creator's death. Certain assets are better left outside of a trust, since a trust may sometimes complicate their distribution. For instance, an individual retirement account with a designated beneficiary would already provide for the transfer of retirement funds upon a person's death.

Jointly owned assets, such as real estate, are also best left outside of a trust. For assets that may be included in a trust, a revocable trust could allow for a somewhat private transfer, without requiring the oversight of a probate court. A revocable trust may be modified by the creator during his or her lifetime, whereas an irrevocable trust can be difficult to modify. To change the terms of an irrevocable trust or in order to fire a trustee, the creator of the trust would need to obtain the approval of everyone involved in the trust, including the beneficiaries.

Some people may see trusts as a way of protecting assets from creditors, but if an individual creates a trust for this purpose after he or she is already experiencing credit problems, a court may see the trust as a fraudulent transfer of assets. Irrevocable trusts may, however, be good to use for ensuring that a disabled dependent will continue to receive financial support permanently.

People thinking about drafting their wills or possibly creating a trust may want to talk through the various considerations with an attorney. Attorneys may help their clients determine what is financially within their means, since irrevocable trusts may be expensive to create.

Source: US News, "How to Choose Between a Revocable and Irrevocable Trust", Joanne Cleaver, June 19, 2014

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