You’ve worked hard for years and built a life for you and your loved ones. But have you taken the time to think about what comes later in life? Retirement, future medical needs, and end-of-life decisions about things like incapacity and inheritance distribution all start to take on greater urgency as we get older. If you have a rough idea about the types of goals you want to have for you and your loved ones, but no real plan for reaching those objectives, then maybe it’s time to get serious about estate planning. And when it comes to meeting estate planning goals, the revocable living trust is one option that is definitely worth considering.
What is the Revocable Living Trust?
You may have heard of trusts and assumed that they were just those things that rich people use to pass on wealth to their heirs – but that only tells a part of the story. In reality, trusts have evolved over the years to fulfill a variety of different needs. Yes, they are still used by the ultra-rich and do provide an excellent way to pass assets from one person to the next. At the same time, however, they are also effective tools that can provide a multitude of benefits for average people just like you.
A trust is simply a legal relationship where one party agrees to hold another’s property for the benefit of a third party. Trusts come in a variety of different forms, can be revocable or irrevocable, and living or testamentary. A revocable living trust is one in which the trust provisions are activated when the trust is created, unlike a testamentary trust that only goes into effect when you die. With a revocable living trust, you as the grantor can name yourself as trustee and beneficiary, retaining control over the assets in the trust throughout your life. You also name a successor trustee to take charge when you die, as well as beneficiaries who will receive the assets when you’re gone.
As indicated by the name, these trusts can be revoked at any time prior to your death or incapacitation. So, for example, if your life circumstances change before you die and you find yourself needing to make changes to the trust, you can do so with relative ease. And since this living trust can effectively direct the distribution of your assets when you die, it can basically take the place of your will – although you may still want a pour-over will to take care of any assets that you fail to transfer into the trust.
How a Trust Can Help You Achieve Your Estate Planning Goals
If you want to avoid probate, a living trust can be one of your best options. That is especially true if you own property in multiple state jurisdictions and want your heirs to have a simple distribution of assets that doesn’t require probate in different states. Of course, probate avoidance is just one of many ways that the living trust can help you achieve your planning objectives.
- The trust can also provide incapacity protection and help you avoid guardianship over your finances. Power of attorney documents can accomplish the same thing, but there can sometimes be complications when third parties have strict rules about the types of POAs they will accept. With a trust, your successor trustee can easily act on your behalf should you lose the capacity to manage your own financial affairs. That can be critically important for ensuring that your estate continues to be effectively managed during times of trouble.
- Trust distribution can be more difficult to contest than a will. That can be an important benefit if you have a complicated family situation and are concerned that certain heirs might attempt to thwart your inheritance plans.
- Your plans are likely to change over time, as you adapt your strategies to meet the needs of a changing family and lifestyle. At different periods in your life, you may need more or less access to the assets contained in your trust. When you have a revocable living trust, those changes are easy to manage, since you always retain control over the trust assets until you die or become incapacitated.
- Like all trusts, yours will provide you with far greater privacy than the probate process. That can be an important benefit when you want to ensure that your family’s inheritance details are kept out of the public eye.
Are There Disadvantages?
Naturally, the revocable living trust is anything but perfect. Like every tool, it has its disadvantages as well. For example, the creation of your trust might be somewhat more expensive than a Last Will and Testament – though it can still save you money over the cost of probate. Moreover, trusts have to be funded if they are to accomplish your planning goals – and that means giving up ownership of assets. There is also a learning curve involved in getting used to managing assets held in trust rather than simply treating them like an owner.
Moreover, a living trust is just one of many estate planning options that you can use to effectively prepare for the future. As such, you should avoid the type of false expectations that might lead you to think that this tool can do everything that your estate plan requires. More importantly, you should consult with an experienced attorney to ensure that you’re taking full advantage of all of the tools and strategies available for meeting your estate planning needs.
At Biddinger & Bitzer, PLLC, our estate planning experts have the experience and expertise you need to ensure that you have the right strategies to meet your goals. We can help you create the revocable living trust that is right for you, and assist you with funding and even managing it over time. If you’d like to know more about how a professional trusts attorney can help you with your planning needs, visit us at our website or call us today at (989) 872-5601.