A living trust in Kentucky offers a variety of benefits in estate planning. A revocable living trust allows you to control assets during your lifetime and manage how they are disbursed after your death.
Living Trusts in Kentucky
A Kentucky living trust can be created by anyone over age 18 of sound mind, called the settlor. The settlor decides what assets to place in the trust and names a trustee who will manage the assets. Anyone can be a trustee, but it is common to name yourself, with a successor trustee in place to step in after your death. You, as trustee, manage the assets for your own benefit during life. When the settlor dies, the successor trustee distributes the assets to the beneficiaries in accordance with the terms of the trust. A revocable trust can be altered or deleted during the settlor’s life. An irrevocable living trust becomes permanent when it is signed.
Creating a living trust in Kentucky allows the assets in the trust to pass outside of probate. Kentucky has not implemented the Uniform Probate Code, so its procedures can be complex. Probate can take many months to complete and involves the cost of an executor and an attorney. A simplified probate process is available only if there is a surviving spouse and the probate is worth $15,000 or less, or if there is no spouse and someone else pays at least $15,000 in preferred claims. For an estate of this small size, a trust would be more costly than the basic court procedure.
Do I Need a Living Trust in Kentucky?
There are many reasons to consider a living trust Kentucky, one of which is the benefit of privacy. The trust is not public record, as a will and probate proceeding are. The terms of the trust, assets in it, and beneficiaries of it are never revealed and remain completely private.
A revocable living trust protects you should you become mentally incapacitated. All of your assets are already controlled, owned, and managed by the trust and a conservatorship proceeding is likely unnecessary for you to have your financial life managed for your benefit.
Kentucky living trusts also provide the settlor with control over the assets and their distribution. During life, you can manage, give away, or use your assets as you normally would. You can live in your home and spend your money. You can remove and add assets to the trust at will. After your death, the trust controls how and when your beneficiaries receive your bequests. You can set specific dates or conditions for disbursement after your death. This is in contrast to a will, which distributes assets once probate concludes.
Living Trusts and Estate Taxes in Kentucky
A living trust does not shield assets from estate and inheritance taxes. Kentucky does not apply an inheritance tax on assets left to spouses, children, grandchildren, parents, or siblings. Bequests to extended family such as nieces and nephews have only a $1000 exemption from state inheritance tax. There is only a $500 exemption for bequests to anyone else. Currently the federal estate tax exemption stands at $5 million, with tax applied to estates in excess of that amount. A specialized trust called a QTIP trust (also known as an AB or marital trust) passes assets to your surviving spouse with no estate tax. A revocable living trust will not protect assets from Medicaid spend down or creditors.
How to Create a Living Trust in Kentucky
To create a living trust in Kentucky, you must create the trust in writing and sign before a notary public. The next step is to fund the trust by transferring ownership of assets into the trust. A living trust is an important option to consider as you create your estate plan. A living trust might be beneficial for you.
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