Revocable living trust: Is it right for you?

March 05, 2013 (Press-News.org) Revocable living trust: Is it right for you?

Article provided by Anderson and Associates, P.C.
Visit us at http://www.davidandersonlaw.com/

Most people consider wills for estate planning; however, this is not the only option. In addition to avoiding probate, a revocable living trust may offer you significant before-death and after-death advantages.

In general, a trust involves three parties: the creator, the trustee or trustees (who agree to manage the assets according to the terms of the trust) and the beneficiary or beneficiaries. Something as miniscule as a dollar can help fund and establish the trust's existence.

A revocable living trust is a written contract, which assigns an individual responsibility for managing your trust property. This type of trust is established while you are alive. It is considered "revocable" because you have the freedom to change or destroy the trust at any time. When you pass away, a living trust becomes "irrevocable," meaning that it cannot change.

Living trusts, in general

A living trust can help you protect your assets if you unexpectedly become incompetent and cannot handle your own affairs. This legal device eliminates the need for your estate to pass through the probate process prior to the estate distribution.

Your trust can pass assets onto your beneficiaries immediately upon your death or it can designate that they be portioned out over time and in specified amounts. A trust may also help to reduce state and federal estate taxes associated with your estate.

Trustees: Any mentally competent adult may be the trustee. You may name yourself as a trustee or someone such as a spouse. If you are named as a trustee, you will have full control over the device while you are living (revocable trust). If you become too ill or disabled to manage your estate, a co-trustee or successor can do this for you.

If you are not confident that a family member would distribute the assets according to your intentions as a trustee, you might name a professional fiduciary as your successor. This might be a trust department of a bank or a professional trust company.

Wills vs. a living trusts

Both a will and a living trust create inheritance guidelines. They determine who gets what, when they get it and how they receive it. However, if you are concerned with your privacy and want to avoid the public probate process, a living trust may work better for you. Living trusts are not part of the public record, unlike the proceedings associated with a will, unless a trustee or beneficiary requests court approval of accounts.

As a grantor (and trustee), a trust permits you to manage the assets as long as you are willing and able. If you are not competent, the device makes automatic provisions for a successor trustee to take over in your place. A will, on the other hand, generally requires use of a power of attorney or conservatorship to manage assets.

If you have a smaller estate, a will should be sufficient, as they are generally less complicated and less expensive than a trust. Yet, this completely depends on your particular situation. When creating your estate plan, it is best to meet with a legal professional. A trust, a will or both devices may be necessary. Also, the instruments may have slightly different significance, depending on your state.

Setting up a trust

Be cautious about using online kits that claim to be documents prepared by a lawyer. A simple mistake could result in an estate-planning nightmare. It may help to meet with an estate-planning attorney to ensure that a living trust is suitable for your particular situation.