In Mississippi, when someone dies—with or without a will—their estate must pass through probate. Probate is the legal process by which a judge formally acknowledges the death of the deceased, validates their will, and appoints the executor named in the will to oversee the administration of the estate. Because probate can be a lengthy and costly process, it is common for families to take steps to avoid probate as much as possible. Here is where a living trust comes into the picture.
A living trust is a type of trust that is created during the life of the grantor—i.e., the person creating the trust. There are two main types of living trusts, revocable living trusts, and irrevocable living trusts.
Revocable Living Trust
Revocable living trusts are the more flexible of the two options, as these instruments can be modified or terminated at any point during the grantor’s lifetime. These trusts primarily serve two purposes: to avoid probate and to keep the nature of the decedent’s asset-distribution decisions private. Assets in a revocable living trust are not subject to probate, meaning they will automatically pass on to beneficiaries of the trust upon the decedent’s passing. Moreover, the process by which the assets are transferred is confidential, unlike probate proceedings, which are public. However, there are also limitations to a revocable living trust in that they do not protect assets from creditors and do not reduce the tax liability of an estate.
Irrevocable Living Trust
An irrevocable living trust confers greater potential benefits but less flexibility. Once a grantor creates an irrevocable living trust, the grantor cannot modify or terminate the trust. Thus, these trusts are best reserved for those who are certain about their intentions and fairly positive that their circumstances will not change. However, the benefits of irrevocable living trusts are significant and include:
- Probate avoidance,
- Private distribution of estate assets,
- Reducing the tax liability of the estate,
- Reducing the income or assets of the grantor for Medicaid application purposes, and
- Protecting estate assets from the grantor’s creditors.
Irrevocable living trusts provide valuable potential benefits. However, due to their inflexibility, these instruments are not suitable for all families. An experienced trust lawyer can help you determine which type of trust best fits your needs.
Choosing Between a Revocable or Irrevocable Living Trust
When deciding between a revocable or irrevocable living trust, there are a few questions that your estate planning attorney will ask you to assess your needs, including:
- What is your primary purpose for creating a trust?
- Is your estate likely subject to federal estate tax?
- Do you have a long-term care insurance policy?
- Are you concerned about the impact of a possible divorce, bankruptcy, or lawsuit?
- Is it important to you to keep these decisions private?
- What is the likelihood of your circumstances changing?
These are just a few of the questions that an attorney might ask you. However, this list gives you an idea of the things you should be considering when thinking about opening up a living trust.
Contact an Experienced Mississippi Trust Attorney for Immediate Assistance
What is a living trust in Mississippi? The dedicated estate planning attorneys at the Harris Law Firm, PLLC, are standing by and ready to help teach you more about your options. We can walk you through the different types of trusts and help determine which type addresses your family’s needs without imposing unnecessary restrictions on your future decision-making abilities. We have more than 40 years of experience helping clients from all walks of life develop comprehensive estate plans designed to provide their families with peace of mind for decades to come. To learn more and to schedule a free consultation, contact us today. You can also reach us through our online contact form.