If you want to protect your loved ones after death, it’s essential to have an estate plan in place.
Luckily, estate planning includes several documents and options available to tailor to your specific needs and wishes. For example, you can create a revocable living trust because of the multiple benefits it provides and flexibility it offers.
Aside from easing the cost and burden to loved ones, there are other things about revocable living trusts that you should know. For instance, you should know how they work, what assets should be placed in a revocable trust, and most importantly, if a revocable living trust is the right choice for you.
Let us help by giving you more information about a revocable living trust.
The revocable living trust has been a significant estate-planning tool for many years and is the foundation for most estate plans. It provides privacy, while avoiding probate and family in-fighting. It ensures the right money gets into the right hands at the right time.
A revocable trust is essentially the replacement of a will. Rather than directing assets toward the court system for probate administration (like wills do), assets are directed to a private entity, called a trust.
It’s called a revocable living trust for two reasons. “Living” because they’re made during your lifetime and “revocable” because you can alter or modify the terms at any time. As life changes, you can remove beneficiaries or designate news ones, and adjust the rules of how your assets are managed.
The purpose of a revocable living trust comes down to avoiding the stress and cost of probate, preserving privacy, and preparing your assets for ease of transition after you die. There are other benefits such as allowing for a successor trustee to manage your trust and assets for you if you become critically ill or incapacitated.
Most individuals choose to create a revocable living trust to avoid probate fees. The more your assets are worth, the more it will cost to probate it. Therefore, it’s smart to put high-dollar, valuable property items in the trust. Some of these items include:
While a living trust does not provide asset protection, like an irrevocable trust, it is flexible and is the basis of many family estate plans. Compared to other legal documents, such as wills, revocable living trusts provide benefits such as increased privacy and more flexibility.
What are the benefits of putting your assets into a revocable living trust? Here are the top reasons we often here:
Avoid Probate – One of the biggest advantages of revocable living trusts is the avoidance of probate. Assets held in a trust avoid probate because the trust itself doesn’t diminish with the trustmaker.
Flexibility – Many individuals find that flexibility to alter their living trust as they see fit is best suited for their situation.
Privacy – Living trusts are never filed with a court, therefore they do not become public record. As mentioned above, living trusts also help avoid probate, which keeps your records our of public proceedings.
Avoids gift-taxes - Transferring your assets to a living trust does not incur gift-tax consequences.
Avoid Guardianship or Conservatorship – A revocable living trust allows you to name a successor trustee so that someone can manage your trust and assets for you if you can no longer do it yourself.
Continuous Management – By naming a professional trustee to manage your property, the wealth that you’ve accumulated can continue to grow for multiple generations and you can put restrictions on the income or withdrawals.
A revocable living trust is one of the most common types of trusts for individuals to create. This is because of the privacy they provide, as well as the flexibility and probate avoidance. However, there are other reasons people consider setting up a revocable living trust:
Future health concerns: If you were to become incapacitated, a revocable living trust allows you to name a trustee to manage not only your estate, but your medical wishes.
Out-of-state assets: Many people own assets in other states, such as a vacation home. If this is the case, then without a revocable living trust, it’s subject to the probate process.
Multiple assets: If you have multiple assets that you know family or beneficiaries will fight over once you pass, then a revocable living trust allows you to establish ground rules for everyone and every asset.
Setting up a living trust isn't difficult, but like every legal document, it is a process with unique problems that can occur. The process includes filing proper paperwork, record keeping, transferring taxes, and funding your living trust. To ensure all steps are properly met and the details are filled in correctly, it’s best to consult with an estate planning attorney.
It’s important to note that not all revocable living trusts are created equal. Working with an experienced estate planning attorney will ensure that your living trust is well-drafted and contains provisions for determining your mental capacity outside of court proceedings, as well as how to take care of you and your assets if you were to become incapacitated. Details such as these will save you (and your family) thousands of dollars in probate.