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Among other estate planning tools, the revocable living trust is gaining in popularity over the common will.
Whether a revocable trust is right for you depends on your circumstances. Consultation with a qualified attorney and a personal financial adviser should always be part of your estate planning.
What is a revocable living trust?
A revocable living trust is a written agreement designating someone to be responsible for managing your property; it’s called a living trust because it’s established while you’re alive. It’s “revocable” because, as long as you’re mentally competent, you can change or dissolve the trust at any time at your own discretion for any reason and you may designate yourself to be responsible for managing the trust.
A trust involves three parties: you as the creator, the trustee or trustees who agree to manage your assets as directed by the terms of the trust, and the beneficiaries.
What is the difference between a living trust and a will?
Both a will and a living trust contain your inheritance instructions, meaning who gets what, when they get it, and how. A trust is often preferred for people concerned with privacy and avoiding probate. A living trust will not become part of the public record unless a trustee or a beneficiary demands court approval of accounts. Probate records are always open to the public.
What if I don’t have a will or a trust?
If you don’t leave valid instructions about your estate, your property generally goes to your spouse or your closest heirs, which may not be what you want to do. This can only be done after probate court has approved such transfers. If you and your spouse were to die without a will or trust and with minor children, the state will choose the legal guardian of your children.
What can a revocable living trust do for me?
A living trust can provide you with the peace of mind that comes from knowing that your assets and your heirs will be protected in the event that you unexpectedly become unable to handle your own financial affairs. It eliminates the need for your estate to pass through probate court before it can be passed on to your heirs. Your trust can be written in a way that will pass your assets on to your beneficiaries immediately upon your death, or you can designate that they be portioned out over time and in amounts that you specify. Your attorney can help by including tax savings clauses that may help to reduce state and federal estate taxes.
One benefit of a living trust that is often overlooked is the ability to build special needs planning right into the trust. The trust can specify how those with special needs are to be cared for, who will care for them, and who will be able to manage the assets of your special needs loved one. This will keep you outside of a court-supervised guardianship or conservatorship. A word of caution: Not all trusts are created equally. Be sure to request that your estate plan addresses the needs of those with special needs.
Among the things that a trust cannot do is protect against a disgruntled heir. A living trust can resolve some of the most common family conflicts that may arise in the inheritance arena but if you cut someone out of your living trust as a beneficiary, he or she can challenge the trust in the same way a will can be challenged.
Do I have to put a lot of money in a living trust?
A trust may be funded with a token dollar amount, a Quit Claim Deed for your home, or by simply designating in your will that your trust is to be funded only upon your death. Just because your assets change doesn’t always mean your trust needs to as well. There are advantages to each choice, depending on your needs and concerns.
So is a revocable living trust right for me?
A living revocable trust isn’t right for everyone. You should take into consideration your age, assets, long-term health care coverage, or a special needs child or loved one. In those circumstances a more advanced estate plan might be necessary to achieve the best outcome.
For a free consultation on the most appropriate estate plan for you and your family, please contact Michelle White at The Roberts Law Firm, P.C.
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