How to Determine if You Need a Revocable Trust
Many people are confused about what a trust is and what it does. There are various types of trusts. What most people have is called a revocable or living trust. This type of trust provides the creator with many benefits if used correctly. Continue reading to find out the characteristics of a revocable trust and its benefits.
What Is A Revocable Living Trust?
Attorneys and financial planners often talk about revocable trusts. The term revocable living trust means the same thing as revocable trust. A revocable living trust is a trust created by a principal (the person or persons putting assets into the trust) and is funded during that person’s lifetime. Some trusts are not funded until someone dies. For example, some trust are created to hold life insurance proceeds for the care of children or pets but are not in existence nor funded until after the principal dies. A living trust is one that is created and managed by the principal while he or she is alive.
A revocable trust can be terminated or changed at any time by the principal. The real benefit of this type of trust is in providing the principal with the power to change the terms of the trust should his or her circumstances change. For example, the principal can change the contingent beneficiaries (who gets the assets of the trust after the principal dies) and the successor trustees (who control the trust after the principal dies). The principal maintains control until he or she dies.
What Are The Benefits of a Revocable Trust?
A successor trustee can take over control of trust property in the event the principal is no longer physically or mentally able to perform the duties of the trustee without having a conservatorship appointed over the principal. After the principal dies, the successor trustee can provide for the seamless transfer of assets to the beneficiaries designated in the trust.
Most importantly, the transfer of assets does not have to go through probate so the estate saves the time and expense of court proceedings. (The cost for attorneys’ fees to probate a $1,000,000 estate is $23,000 minimum.) Further more, the documents remain private versus court documents which are open to the public. There can also be tax advantages to gifting assets through a trust after one passes on.