A Loving Trust is a legal agreement whereby you grant someone, whether an individual or entity, the ability to manage or oversee your assets during your lifetime. You are called the Trustor/Grantor/Settlor and the person that is tasked with overseeing your property is called the Trustee. Anybody that you name to get your assets is called a beneficiary.
A Loving Trust also contains rules regarding who can take care of you personally, which would include health decisions, as well as your financial decisions. A loving trust isn’t one-of-a-kind when it pertains to estate planning; it is actually just another name for a revocable trust.
Trademark of Name
The issue with Loving Trusts emerges in the application of the name. There are some lawyers that belong to an organization that offers them with certain specific types of legal documents. They call this system the “Loving Trust” estate planning device. Within the file, there is a notice that indicates that the term “Loving Trust” is an accredited trademark. The trademark does not concern the attorney that drafts your trust. Rather, it concerns the company that offers the trust form to the lawyer.
Problems with a Loving Trust
A Loving Trust can be problematical. One issue is that a normal Loving Trust has different provisions relating to “community property.” Community Property is a unique course of marital residential property with respect to which spouses have particular statutorily specified rights – yet such holds true only in supposed “community property states” such as Texas or California. Kansas is not a community property state, and a trust by a Kansas resident with community home stipulations is, at best, perplexing and at worst could possibly produce some serious legal consequences.
But there is a much more major issue with the Loving Trust. The Loving Trust is a joint trust developed by a couple. The Loving Trust allows either the husband and wife to modify or withdraw the trust. The trust may not be changed or revoked by their representative under a power of attorney for either partner or partners. Moreover, when one spouse dies, the trust may not be changed.
One trouble with this is that these types of trusts can trigger issues for Medicaid planning. If you use a basic revocable trust, and the trust recipient calls for assisted living home care, then the trust can be revoked and the issue resolved. If one is the beneficiary of a Loving Trust, nonetheless, and the partner has died, then such trust might not be subject to cancellation. Consequently, such trust may create Medicaid ineligibility, or might protect against the surviving spouse from preserving possessions.
And for estate preparing purposes, since estate tax regulation has been varying in recent years, it does not make sense to draft a trust that will certainly end up being irreversible and unmodifiable after one’s partner perishes. Such trust could not be changed to react to changes in the death tax legislation. Consequently, using a Loving Trust may lead to the repayment of estate taxes that otherwise could have been avoided. Be extremely cautious when taking care of a legal representative that uses Loving Trusts as a part of the preparation process.
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