A revocable living trust is a legal document that is used to manage and distribute assets during a person’s lifetime and after their death. Also known as a “living trust,” this type of trust allows the settlor (the person creating the trust) to retain control over their assets while they are alive, while also providing for the management and distribution of those assets after their death. In this blog post, we will explore the benefits and drawbacks of a revocable living trust and provide some tips for creating one.
Benefits of a Revocable Living Trust
There are several benefits to establishing a revocable living trust as part of an estate plan. One of the primary benefits is that a trust can help avoid probate, which is the court-supervised process of distributing assets after a person’s death. Probate can be a lengthy and expensive process, and it can also be emotionally difficult for the family members involved. By transferring assets into a trust, the settlor can avoid the probate process altogether, which can save time and money and help ensure a smoother transition of assets to beneficiaries.
Another benefit of a revocable living trust is that it can provide for the management and distribution of assets in the event that the settlor becomes incapacitated. If the settlor is unable to manage their own affairs due to illness or injury, the trustee (the person or entity responsible for managing the trust) can step in and manage the assets on their behalf.
Additionally, a revocable living trust can provide more privacy than a will. Because a trust is not a public document, the settlor’s personal and financial information can remain confidential.
Drawbacks of a Revocable Living Trust
While there are many benefits to establishing a revocable living trust, there are also some drawbacks to consider. One of the primary drawbacks is that a trust can be more expensive to create than a will. The cost of creating a trust can vary depending on the complexity of the trust and the services of the attorney creating it.
Another potential drawback of a revocable living trust is that it requires ongoing maintenance. The settlor must ensure that all assets are properly titled in the name of the trust, and any new assets must be transferred to the trust as well. This can be time-consuming and may require the assistance of an attorney or financial advisor.
Creating a Revocable Living Trust
If you are considering creating a revocable living trust as part of your estate plan, there are a few key steps to follow:
- Consult with an attorney: A revocable living trust is a legal document that requires the assistance of an attorney to create. You should consult with an attorney who is experienced in estate planning to ensure that your trust is properly structured and executed.
- Identify your assets: Before creating a trust, you should identify all of the assets that you want to transfer into the trust. This may include real estate, investments, bank accounts, and other assets.
- Choose a trustee: You will need to choose a trustee to manage the trust after your death or in the event that you become incapacitated. You may choose a family member, friend, or professional trustee.
- Fund the trust: Once the trust has been created, you will need to transfer your assets into the trust. This may require changing the titles on property deeds or bank accounts, or re-registering securities in the name of the trust.
In conclusion, a revocable living trust can be a powerful tool for managing and distributing assets during and after a person’s lifetime. While there are some drawbacks to consider, the benefits of a trust can make it a valuable addition to any estate plan. By working with an experienced attorney and carefully structuring your trust, you can ensure that your assets are managed and distributed according to your wishes and provide for your loved ones in the most efficient and effective way possible