Revocable Living Trust and When Do You Need It

Is estate planning on top of your mind? Do you have a will written up? You may want to take a closer look at a revocable living trust as an alternative. It is a more expensive option, but it gives you flexibility, even beyond the grave. A simple will is going to cost you a few hundred dollars, whereas a revocable living trust will run you a few thousand dollars.

Setting Up a Revocable Living Trust

Once you set up a trust, where you appoint any competent adult or business entity as the trustee, you can start moving your assets into it. These can include real estate, financial accounts, life insurance policies and any other investments. By placing them into your trust, these assets do not have to undergo the inheritance process upon your passing. The trustee simply follows the rules you initially set forth.

Benefits of Revocability

Revocability means you keep control over your assets despite the fact that they no longer belong to you. Trust rules can be amended by you at any time. The income generated by the trust goes to you and is subject to standard income taxes. However, the trust does nor release any assets to your beneficiaries while you’re still alive. Upon your passing the transfer of your assets to beneficiaries is a much faster than the probate process.

It doesn’t provide you with great tax benefits, but again, it does provide you with tax flexibility. A trust offers you an excellent segregation of assets as you are not the owner. This comes in handy for example in marriages. A trust also keeps your assets private. In the latter case an establishment of a trust cannot be setup for the purpose of defrauding creditors. Such a move would lead to legal repercussions.

Trust’s Disadvantages

Setting up a trust will cost you. Managing of such trust requires much more record and bookkeeping. Also keep in mind that all titles have to be transferred to the trust. There are no direct tax breaks. And if you appoint yourself the trustee, then there is no real assets protection from creditors. A charitable trust will, for example, establish much better asset protection for your estate. But that’s because a charitable trust is irrevocable.

If you’d like to explore this topic in a more detailed and personal way, then don’t hesitate to contact us. And an estate planning specialist will get back to you shortly.

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