A lot of people look past the possibility of creating a trust when they are thinking about estate planning, because they assume that trusts are only useful for people who are multimillionaires. To these individuals, it seems like a last will is the only logical estate planning document to use.
In reality, there are trusts that are used by very wealthy people who are exposed to estate taxes, but there are other types of trusts that can be quite beneficial for people who are not among the financial elite. One of them is the revocable living trust.
In this blog post, we will look at three things that you probably didn’t know about a living trust.
1.) You maintain the control.
The ideal that a lot of people have about trusts is that you surrender all control of assets that you convey into a trust. This is one of the reasons why they shy away from trust creation, because they are concerned about having access to the resources if they ever need them.
This is something that you do not have to worry about if you use a revocable living trust as the centerpiece of your estate plan. The person who creates a living trust is called the grantor or settlor of the trust. There is a trust administrator that is called the trustee, and beneficiaries can receive monetary distributions from the living trust.
With a living trust, the grantor will typically act as the trustee and the beneficiary. So, if you establish a revocable living trust, you would be the person who is handling the assets that are in the trust. You could take monetary distributions as you see fit, so there would be no loss of control.
It would also be possible for you to add assets to the trust after you originally create it, and you can remove assets from the trust at any time. To account for the things that will happen after you pass away, you name a successor trustee, and you also name successor beneficiaries. While you are alive and well, you can change the successor trustee and beneficiary designations if you ever choose to do so.
2.) You can prepare for possible incapacity.
Many people become unable to handle their own finances late in their lives. There are various different causes of incapacity, but Alzheimer’s induced dementia is a huge threat to our nation’s elderly population. This disease strikes almost half of people who are at least 85 years of age, and the oldest segment of the our society is growing faster than any other.
We mentioned the selection of a successor trustee in the previous section. To account for possible incapacitation, you could empower the successor trustee to administer the trust if you ever become unable to make sound financial decisions. In this manner, the assets in the trust would be managed by a steady hand.
3.) A living trust can protect inheritances.
If you leave a direct, lump sum inheritance to someone who is not good with money, this love one could squander it quickly, and financial hardships could ensue later on. Plus, there are people who are not irresponsible who may not be prepared to appropriately handle large sums of money.
You can include a spendthrift provision if you establish a revocable living trust. The trust would become irrevocable after you pass away, and assets in the trust would be protected from the creditors of the beneficiaries.
In addition to this, you can leave instructions to the trustee with regard to the manner in which you want the assets to be distributed to the beneficiaries after you are gone.
For example, you could allow for a certain amount to be distributed each month until the beneficiaries reach a certain age. Some people will allow for distributions of the earnings from the trust so that the principal remains intact to generate income over an extended period of time.
Download Our Special Report
We have provided a bit of food for thought in this blog post about revocable living trusts. A very significant percentage of people who learn all the facts decide that a living trust is the ideal estate planning tool.
If you would like to dig deeper, we have a valuable resource that you can access quickly and easily through this website. Our firm has prepared a series of in-depth special reports, and one of the reports is focused on the value of revocable living trusts.
To obtain access to your copy of the report, click this link: Free Living Trust Report.
- What Is the Best Way to Plan for Incapacity? - September 17, 2021
- What Is an ILIT? - September 14, 2021
- Estate Planning for the Beginner - September 3, 2021
