Estate planning is essential to managing one's wealth, especially as you get older. It's important to account for what will happen to your estate, whether you're rich or moderately wealthy. One of the best ways to plan your estate is to establish a trust.
Given that there are several types of trusts, you might get confused about them and which is the best for you. You don't need to worry. We at the Law Offices of James C. Shields are here to help you. Please read on to know more about revocable living trusts.
What Is a Revocable Living Trust?
Basically, a trust is a legal agreement for holding, managing, and disseminating property involving at least three parties whose terms are embodied in a trust agreement. These parties include the following:
- The trustor who is also known as the grantor, settlor, or creator of the trust.
- The trustee who possesses legal title to the property of the trust on behalf of the beneficiary(s). This individual also enforces the terms of the trust agreement and state law.
- The beneficiary who benefits from the trust. The beneficiaries can be many or different as defined in the trust agreement.
A revocable living trust, also referred to as a revocable trust, is a written document that determines or shows how your estate is to be handled once you die. It's a type of trust that you can cancel, revoke, or change its terms anytime since you, the grantor or creator, is the first trustee and beneficiary.
Some of the assets you can place in a revocable living trust include your house, car, or finances. However, you should not place assets such as real estate, financial accounts, questionable assets, retirement accounts, life insurance, and medical savings in your revocable living trust.
Why Should I Create a Revocable Living Account?
1. It Avoids Probate
By creating a revocable living trust, you have the chance to avoid probate, saving your family or beneficiaries time, money, or unnecessary conflicts and aggravation at the time of death. Your trustee will pass your assets on to your beneficiaries without waiting for a court order.
Besides avoiding probate, a revocable living trust is cheaper in the long run in terms of time and money to maintain.
2. It's Changeable and Flexible
It's also easy to make changes to your revocable living trust. All you have to do is visit your estate planning attorney and change, add or delete assets to your liking. However, you might be required to be accompanied by your spouse or partner to revoke or change the provisions of the trust if it's a shared one.
3. Your Estate Receives FDIC Protection
While the Federal Deposit Insurance Corporation (FDIC) typically protects money in a bank account up to $250,000, this amount is higher for revocable living trusts, with the FDIC offering up to $250,000 per beneficiary in insurance. A revocable living trust can receive up to $1,250,000 in insurance from the FDIC.
4. It Covers Your Assets Before You Die
A revocable living trust covers incapacitation and guardianship. Thus, in case of incapacitation, your trustee automatically, without court proceedings, takes over the management of your affairs. Under guardianship, you can also stipulate living situations and spending patterns of minor children or those with issues included in your trust.
5. It Guarantees Privacy
Unlike wills and other types of trusts, the details of revocable living trusts don't become public records after your death. The trustee distributes your estate among your beneficiaries privately.
How Do I Create a Revocable Living Trust?
Here are the steps for establishing a revocable living trust:
- Take an inventory of your assets
- Find deeds and certificates
- Identify and list your beneficiaries
- Consider trustees. It can be you, your spouse, the both of you, or a third party
- Draw up and complete the trust document
- Sign and notarize the trust document
- Transfer assets and business interests into the trust
- Draft supplemental documentation such as a will and testament for transferring assets outside the trust.
An Attorney Might Help
The concept of managing your estate through trusts can be overwhelming, especially if you aren't familiar with the process. That's why you need a reliable and trustworthy attorney.