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A Life Trust is the centerpiece of every really effective estate plan. This is because the trust is attached directly to the asset. The trustee literally owns the property.

No court process is required, as in the case of a will. The property remains yours during your lifetime (That’s why we call it a “Life” trust.) There is no tax consequence. Yet you can manage who has access to your property. You can appoint someone else to manage your property for you. The property remains yours. You can remove your manager (called your “trustee”) and replace them with someone else. You can also be your own trustee. As long as you live, you are the beneficiary of your Life Trust, regardless of who the trustee is. You can provide in detail for the distribution of your property after you pass on. You can change these distributions with a minimum of fuss.

Your trustee will have a great deal of power. Yet the trust is legally binding. A trustee who ignores the instructions in the trust can be removed, and, if they really misbehave, can be subject to legal consequences. You can give your beneficiaries the legal right to remove and replace the trustee after you have passed. (This power is seldom exercised, because trustee is a thankless, unpaid job, that the other beneficiaries are often happy to have someone else perform.)

Does the Life Trust “protect” your property? It can protect your property from the liabilities of your trustee. You can design it so as to protect your ultimate beneficiaries from certain tax consequences. What it cannot do is protect your home from the dreaded Medicaid Lien. For that, you would need another type of trust – an irrevocable “Legacy” trust.

But, even if you choose to use a Legacy Trust, it is still wise to use a Life Trust to hold active accounts. Any attempt to protect your active accounts from your own liabilities would be regarded as a fraud on creditors.

Although it is the centerpiece of a powerful, working estate plan, the Life Trust is not alone enough. Some assets cannot be or should not be owned by your Life Trust. It is important to work with a competent legal counselor to design and implement your estate plan.