Where estate planning is concerned, most people seem to prefer to keep things as simple as possible. For the average person who engages in any type of planning, that typically means a simple will to designate how assets are to be distributed to heirs. Some include tools like a power of attorney, advance directive for healthcare, and a living will. Far too many people miss out on the advantages that can be enjoyed with a tool like the revocable trust. But what is a revocable living trust, and how can it benefit your planning effort?
What is a Trust?
To understand a revocable trust, you need to first understand the basic elements in a trust, and what this legal device is meant to accomplish. Every trust has certain elements that it must possess if it is to be considered valid. These include the grantor, a trustee, beneficiaries, trust terms, and assets:
- The grantor is the person who creates and funds the trust.
- The trustee is the party chosen by the grantor to maintain and manage the trust assets for the benefit of any named beneficiaries.
- Beneficiaries are those persons who will ultimately receive the benefit of those trust assets.
- Trust terms include all the provisions in the trust document related to the powers of the trustee, management of trust assets, and other instructions.
- Trust assets include all the property the grantor transfers to the trust to fund its mission and operations.
Every one of these elements must be in place for a trust to be valid and accomplish its objectives. As a result, a trust without a trustee will never be recognized as valid. The same holds true in situations where there are no named beneficiaries, or where no trust terms exist. And, of course, a trust without assets is worth less than the paper on which it’s printed. After all, without assets, there is nothing for the trustee to manage or pass on to beneficiaries.
What is a Revocable Living Trust?
Once you understand the nature of the trust, then it’s easier to understand revocable trusts. There are two basic types of trusts that the average person is likely to encounter during the estate planning process: the revocable trust and its irrevocable counterpart. The irrevocable trust is a trust that cannot be revoked once it is created and funded. The assets that you place into it cannot be reclaimed by dissolving the trust, so you effectively lose control over those assets forever.
The revocable trust lacks that permanence. As its name suggests, the revocable trust can be revoked or amended by its grantor at any time during his life. That has helped to make this type of trust one of the more popular estate planning tools, since so many people are hesitant to give up total control over their wealth without having the ability to change their mind if their circumstances change at some future time. With the revocable trust, they always have the option of reclaiming the trust assets if they need them – which means that those assets are never truly out of their reach while they’re alive.
What Benefits Can a Revocable Trust Provide?
There are many benefits available to those who choose a revocable trust. It’s important to understand the advantages that you can enjoy so that you know how these trusts can enhance your estate planning efforts and accomplish certain goals.
- With a revocable trust, you can avoid the probate process for any assets owned by the trust. That can potentially save your estate money, preserve assets for your heirs, and reduce the amount of time that it takes for them to receive distributions.
- The revocable trust can protect your privacy by providing an opportunity for inheritance matters to remain out of the public eye.
- Your revocable trust can provide protections against incapacity, but ensuring that there is someone there to manage your assets if you lose the capacity to do so yourself.
- With a revocable trust, you can name yourself as the initial trustee, and maintain control over your trust assets while you’re still alive. A named successor trustee takes charge when you’re gone.
What Can’t You Do with a Revocable Trust?
Of course, there are some things that a revocable trust cannot do. For example, it cannot provide protections against creditors in the same way that an irrevocable trust can. It also cannot shield assets from government eligibility calculations when you’re applying for benefits like Medicaid. Finally, these trusts provide no benefits where estate taxes are concerned.
Those protections are not available because of the nature of the trust and the fact that you always retain the ability to gain access to those assets by simply revoking the trust. Since you can access the wealth, creditors can too. And the government treats that wealth as though it’s still part of your estate.
Do You Need a Revocable Trust?
Of course, the most important question you can ask yourself is whether you need a revocable trust. That’s a matter of personal preference in many instances, but there’s no denying the benefits that you can enjoy when you incorporate a trust into your comprehensive estate plan. If you want to ensure that your loved ones have a way to receive their inheritances without enduring a lengthy and costly probate process, and you still want to maintain control over your assets until you die, then a revocable trust may be the right tool for your planning needs.
So, what is a revocable living trust? As it turns out, it just may be the tool you need to complete your comprehensive estate planning effort. At the Fouts Law Group, LLC, our revocable trust experts can work with you to evaluate your planning needs and determine whether a trust is right for you. If it is, we can help to create the trust you need to avoid probate, accomplish many of your most pressing planning goals, and maintain control over your assets while you’re still living. To learn more about how a revocable living trust can benefit your estate plan, contact us online or give us a call at (404) 596-7520.
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