There are generally three levels of estate planning [POA = Power of Attorney]:
- Will, POA over Healthcare, POA over Financial
- Living Trust [includes level 1 items]
- Asset Protection Trust [include level 1 items]
Probate is a court case that friends/family [heirs] have to file to obtain control of the estate. A will is an instruction manual for the Judge during Probate. Generally, much like any other lawsuit, Probate is to be avoided as it can be expensive and time consuming. Everyone 18+ should have a will and the POAs, with the Healthcare POA arguably being the most important at this level.
Regarding a living trust, this is also referred to as a revocable trust. Simple rule, it’s revocable, so a court can order you to revoke it. That means it does not create asset protection. The main focus of a living trust is to avoid probate.
For an asset protection trust, this is also referred to as an irrevocable trust. Simple rule, it’s irrevocable, so a court can not order you to revoke it. This creates asset protection in addition to avoiding probate.
For the above trusts, some things are the same:
- avoid probate
- put your LLC in trust and let trust transfer ownership
- put house in trust
- trust will not distribute if kids are getting divorced, judgement, drugs/alcohol etc.
- advise your kids to get a pre-nup to make sure distributions stay separate property
Other than asset protection, or lack thereof, I believe the primary differences that you are concerned with are:
- a living trust essentially self-destructs. it might take years, but after everything is distributed to your kids its done and closed
- an asset protection trust can go on for hundreds of years, so you can have control beyond your own children, such as if you want to provide college funds for your grandchildren directly instead of counting on your kids to do it
If you are interested in setting up an estate plan or would like to talk more about this topic, give us a call at (702) 850-7798, or click here to schedule a complimentary, 15-minute phone consultation with our attorneys.