A revocable living trust is one part of an estate plan. This is a legal document that allows you to pass your assets to your family after you pass away. There are many benefits to creating a revocable living trust.
What Goes into a Living Trust?
When you create a living trust, you can include a variety of assets such as:
- Your family home and other real property
- Life insurance benefits,
- Investments, including stocks, bonds, and CDs, and
- Bank accounts.
When you prepare your living trust, you will also need to select a trustee who is in charge of administering the trust. Although I prepare all trust documents in plain English so they are easy for everyone to follow, you should speak with your trustee to ensure that they fully understand the serious responsibilities they have as your trustee. I also recommend that you select one or more successor trustees, in the event that your original successor trustee is unable or unwilling to act when the time comes.
Three Benefits of a Revocable Living Trust
1: Protect Minor Children
One of the major benefits of a living trust is that you can ensure your minor children are protected in case something happens to you. Minor children cannot own assets on their own, so assets in the trust are held in your child’s name.
You can also set limitations on how assets in the trust can be used. You may create a trust that can only be used for basic maintenance, support, and college education until your children turn 25 or 30. This helps your children avoid squandering the assets until they are mature enough to manage the assets on their own.
If you have young children, you should also create a last will that names who the caretakers of your children will be in the event that something happens to you. This is the only document where you can list guardians of your children, so it is important to have both a living trust and a last will if you have minor children.
2: Avoid Probate
A second benefit of a living trust is that you can avoid going through probate court. This is the court-supervised process of distributing a deceased person’s estate. If you have a last will, or no estate plan at all, your estate may go through the probate process before assets are transferred to your heirs. This can take some time in an already stressful situation. Since this is a public process, all records of your estate will be part of the public record.
On the other hand, if you place your assets into a trust, you do not own them. Instead, they are owned by the trust and can be used immediately to support your beneficiaries.
3: Flexibility of Revocable Living Trusts
Finally, revocable living trusts are incredibly flexible and can be modified in the future as your life circumstances change. On the other hand, irrevocable trusts cannot be changed. This is why most of my clients choose to set up a revocable living trust.
This flexibility is extremely important because we do not know what the future holds. So much can change day to day. Having a revocable trust allows families to alter and amend their plan due to life changes.
This article does not contain legal advice. If you have questions about the benefits of a living trust, are interested in setting one up for your family, or want to discuss other estate planning documents, contact me today to set up an appointment.