How does creating a living trust help me?
A living trust is a very important document in estate plan that many people take for granted. Most people are more concerned about the disposition of their assets after they pass away, and fail to address every tragic possibility that may occur during their lifetime other than death. Certain things can render you unable to make sensible decisions or actions regarding your finances and health care, and you therefore would need someone else to make those important decisions for you, and this is where a living trust comes in.
A living trust, also called a revocable living trust, is a special kind of trust that helps you protect your assets and ensure they are reliably managed in the event you become incapacitated. Incapacitation results when you are declared to be mentally unfit to attend to your own issues, such as managing your estate or making decisions for yourself. According to the Alzheimer’s Association, one-third of the population of American senior citizen suffer from Dementia or any other form of mental illness. With such statistics, it becomes highly important to make plans should you become a victim of circumstances.
If you do not make a plan to ensure someone can take management duties of your finances and property, then your incapacity can cause devastating effects on your finances and put your family through a lot of legal stress getting guardianship for you. Applying for guardianship can be quite expensive and stressful, with your family having to go to court and prove your incapacity. But with a living trust, your successor trustee, named by you when creating the trust, takes up the responsibility of managing your trust property immediately you become mentality incapacitated or involved in some form of accident rendering you incapacitated. You must not wait for disaster to hit before making an incapacity plan. Planning for incapacity should be done early when you are healthy as accident or illness may occur at anytime.
What counts as incapacitation in a living trust?
When creating a living trust, you name a successor trustee who would take over management of your trust property in the event you become incapacitated. But what qualifies as incapacity?
An incapacitated individual as afore mentioned, is one who has become unable to care for himself, or make appropriate decisions. A patient suffering from Alzheimer’s or any other mental illness can therefore be seen as incapacitated.
A car-crash victim who is undergoing hospitalization cannot attend to his/her business and would need someone to stand up for him/her. When such a person has created a living trust, his or her successor trustee immediately steps up. Several things can pass as incapacity and it may be left to a medical professional or the court to define if the situation actually qualifies as incapacity in a revocable living trust.
Defining incapacity in a living trust
A medical professional in the state where the trust was created could be relied upon for defining incapacity. As the grantor of the trust, one could specify in the trust that the medical professional must be specialized in the same condition which he or she may suffer from. This option enables the grantor to choose how many doctors or physicians would be required for proving or establishing the incapacity, after which it would then be stated in the physician’s writing that due to physical or mental illness, the grantor can no longer manage his/her personal and financial affairs.
What counts as incapacity in a living trust may also be defined by a court having jurisdiction over the trust. This type of provision allows that the grantor be declared by the court as incapacitated if that court makes such a finding and then appoints a guardian. The downside to this option is the cost and publicity involved.
Finally, incapacitation in a living trust may be defined by a panel of family, friends and advisers of the grantor. A lot of persons like this option as several persons working together will be involved in the decision-making, and majority rules. But the downside to this option is the individuals in the panel may lack adequate medical knowledge about incapacitation, and if the grantor disagrees with the panel, it may lead to a court case.
There are obviously several ways to define what counts as incapacity in a living trust, and it would be in your best interests seeking the advice of an estate planning lawyer as what works for one may not work for another.