Who Benefits from a Revocable Living Trust?
A revocable living trust is an estate-planning tool with wide appeal. Almost anyone with substantial or complex assets might benefit from a revocable living trust as opposed to a simple last will and testament. The primary benefits of a revocable living trust are privacy and ease of management.
Read on to learn more about revocable living trusts
What Is a Revocable Living Trust?
Like any trust, a revocable living trust begins when assets are set aside in the fiduciary care of a third party, the trustee. Assets might include real estate, stocks and bonds, and bank accounts. This third party, who has a legal and ethical obligation to act in the best interest of your entrusted assets, can be an individual or an institution, such as a bank or trust company.
When the creator of a trust (the grantor) places assets in a revocable living trust, the grantor maintains control over them even though they are no longer the grantor’s property. As the trust is ‘revocable,’ it can be altered or dissolved at any point before the creator’s death. This makes revocable living trusts especially convenient for responding to changes in one’s life.
In preparation for the grantor’s death, very specific instructions about inheritance can be made. As discussed below, this is another convenient management feature of revocable living trusts.
What Are the Benefits of a Revocable Living Trust?
A revocable living trust can protect your privacy by keeping your assets out of probate. The probate process takes a long time and can consume a lot of money in procedural fees. Beyond the inconvenience and expense of probate, the probate process is a matter of public record, meaning your will, along with details about your estate, can be accessed and viewed by anyone, invading your privacy and making your heirs’ finances known to the wider world.
Because assets placed in a revocable living trust become the property of the trust—not the grantor or an individual trustee—and because the legal entity of a trust cannot die, assets placed within a trust are therefore not subject to probate.
As mentioned above, specific instructions can be made about the inheritance of the trust’s assets. These can include limits on a guardian’s spending to protect assets for minor children, or the specific disinheritance of a relative. While these moves may not be popular, because assets in a trust are exempt from probate your instructions cannot be challenged in probate court.
Some Drawbacks to Revocable Living Trusts
Revocable living trusts are not designed for asset protection or tax savings, contrary to popular belief. There is no tax break associated with having a revocable living trust during one’s lifetime; in fact, the income earned by assets held in one of these trusts are taxable as income. Additionally, there are more efficient estate planning strategies if your goal is to minimize estate taxes.
Learn If a Revocable Living Trust is Right For You
Interested in a revocable living trust? Not sure what the best trust for your needs is? Schedule an appointment today with one of our attorneys. We know our community, we know trusts, and we’d like to help protect what you’ve earned.