Revocable Living Trusts
What is a Revocable Living Trust? Sometimes knows as a “Living Trust,” a “Revocable Trust” or a “Family Trust,” a Revocable Living Trust is a legal document that gives the Trustee you choose title (“equitable ownership”) of your assets for the benefit of the beneficiaries. The assets can be your home, investment accounts, personal belongings, etc. In some ways, a trust is very similar to a will in that the revocable living trust provides instructions regarding who gets your property at your death.
How is a Living Trust different from a Will? Although a trust operates much like a will, it has some very useful advantages that a will does not. First, a living trust avoids probate. A will does not avoid probate. This means that at your death, if you have a trust and have retitled your assets into the trust, the title to your property will not have to be transferred to your loved ones through the probate court. The trustee, using the instructions of the trust, can distribute this property directly to the beneficiaries. This can save your loved ones much time, expense and hassle during this very emotional time.
Second, a trust lets you determine how your property is handled if you become incapacitated. If you do not have a trust and you become incapacitated, the probate court may step in and appoint a guardian and/or conservator to make decisions on your behalf. With a trust, decisions about your property can be made by a family member or trusted friend that you appoint to be Trustee.
Third, a trust gives you some control over the assets you leave to your children and grandchildren. Without a trust, your descendants generally receive their share of your assets outright at 18 or 21 years old. With a trust in place, you can exert reasonable control as to when they receive their share, and in what amounts. For example, you may want your child or grandchild to get some money when he or she turns 18, particularly to cover college or living expenses, but you may prefer they not get the rest of their share until they are more mature. A revocable living trust allows you to provide for their education and/or living expenses and disperse the bulk of the trust assets to them at a later date.
Fourth, a trust allows you to do more effective tax planning to avoid estate taxes, gift taxes and generation skipping taxes. Merely having a trust does not avoid these taxes, but having a trust will allow you to set up a plan to minimize or avoid them altogether.
And Fifth, a trust is a private document. Unlike a will, it is not made part of the public record when you die, so you can keep your intended distribution relatively private.
Do I need a lot of wealth to have a trust? No, you do not need a lot of wealth to have a trust. A trust can be funded with any asset or property, such as your home, investment accounts, personal belongings, insurance proceeds, etc..
Who is a Living Trust useful for? A trust is appropriate for anyone who seeks to:
- Avoid Probate;
- Plan for Incapacity;
- Control how and when children and grandchildren receive their share of your assets;
- Minimize or Avoid Estate Taxes, Gift Taxes or Generation Skipping Taxes; or
- Keep their Final Instructions Private
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