Trusts and their Applications

Achieving Estate Planning Goals with Powerful Tools

Trusts are both the most complicated, and also most potentially-useful tools in estate planning, offering a level of control, flexibility, and protection that few other legal instruments can match. At their core, trusts allow you to separate legal ownership from beneficial use, placing assets under the stewardship of a trusted fiduciary to be managed and distributed according to your precise instructions. In jurisdictions like Maryland, Virginia, and North Carolina, trusts derive their strength from a well-developed body of statutory law—such as state trust codes—as well as longstanding principles of common law that govern fiduciary duties, interpretation, and enforcement. The result is a highly-adaptable framework capable of addressing a wide range of personal, financial, and family objectives.

Inter vivos (or “living”) trusts are created during your lifetime and are often used as the foundation of a comprehensive estate plan. Revocable living trusts, in particular, allow you to retain full control over your assets while alive, with the flexibility to amend or revoke the trust as circumstances change. They are especially valued for their ability to streamline the administration of an estate by avoiding probate, maintaining privacy, and ensuring continuity of asset management in the event of incapacity. While the probate process (court proceedings concerning wills) is public, trusts and their administration are private, keeping the estate succession processes that happen under them secret. For many families, a properly structured living trust provides both convenience and peace of mind.

Testamentary trusts, by contrast, are established under the terms of a will and come into existence only after the will undergoes probate. These trusts have their utility in managing inheritances over time, whether in providing for minor children, supporting a surviving spouse, or protecting beneficiaries who may not yet be prepared to manage assets outright. Because they are embedded within a will, testamentary trusts operate within the probate process but benefit from the same legal safeguards and fiduciary structures that govern all trusts.

Irrevocable trusts represent a more specialized planning strategy, the legal equivalent of a surgical tool designed to achieve a specialized type of objective that extends beyond the grantor’s lifetime control. Once established, these trusts generally cannot be altered or revoked, which allows them to serve as powerful vehicles for asset protection, tax planning, and generational wealth preservation. Wealth preservation is not only for the very rich, but can benefit families of all types of financial situations, and this type of trust is an effective means for achieving such goals. The irrevocable trust does just what its name suggests; it removes assets from the grantor’s control for life, allowing them not to be counted as the grantor’s assets, and shielding those assets from to effect efficient transfer to future generations.

Of particular importance is the use of irrevocable trusts in long-term care and public benefits planning—commonly referred to as “Medicaid trusts.” When properly structured and timed in accordance with applicable look-back periods and eligibility rules, these trusts can allow individuals to preserve key assets—most notably, the family home—while still qualifying for government assistance such as Medicaid. This strategy can enable clients to remain in their homes during their lifetimes, while ensuring that those homes pass to the next generation rather than being consumed by long-term care costs.

Trust planning is not a one-size-fits-all endeavor. It requires a careful balancing of legal requirements, financial considerations, and uniquely-personal goals. Our Managing Attorney brings extensive experience in designing and drafting trusts across this full spectrum, with a particular sensitivity to the cultural and familial priorities that shape each client’s vision. This area of estate-planning law, in particular, is one in which Mr. Evans’s specialized abilities have come into play; the Medicaid Trust is a favorite legal tool of the local Chinese-American community, and as a fluent and literate Chinese speaker, the Managing Attorney is well positioned to serve this demographic with its estate-planning needs.