Living Revocable Trust Advice You Can Trust
Estate planning is something you should get into if you haven't yet done so. You'll want to ensure that your home and your other assets get distributed in a way that makes life much easier for your loved ones after you're gone.
Today we're going to talk about the revocable living trust and why it might be the best path for you to take in your estate planning journey. We'll explain what it is, how it works, and compare it to some other popular options. Then we'll top it off with some advice you can trust.
What Is a Revocable Living Trust?
A revocable trust is a document that specifies how you want your assets distributed when you pass away.
That's the simplest way to explain it. A revocable trust is similar to a will but very different at the same time. It's a living trust, which means you create it while you're still alive. It's unique in that it's in effect while you're living.
Therefore, the allotments that you create in your revocable trust will take effect if you become incapacitated for any reason. It will name a successor, and that person will handle the trust and all of its assets while you're incapacitated. That person will have to handle the assets in the trust the way you specified they should do so when you created it. The power will go back to you if you recover from your period of incapacitation.
What Goes Into a Revocable Living Trust?
Most people put their homes into a revocable trust. However, other assets such as vehicles, tangible personal property, and certain annuities can go into it, as well. You can also put bank accounts, stocks, bonds, and accounts receivable accounts into it.
It’s Changeable
What's favorable about a revocable living trust is that you can change it at any time.
Therefore, you can add assets to it if you obtain new assets or forget something when you first create it.
You can remove assets if you no longer desire to have them distributed.
You can also add and remove beneficiaries and change the way the trust treats them after your death.
You even have the right to close the trust or void it any time you desire to do so.
Many people choose the path of a revocable trust for their estate planning because it's so adaptable. They never know what's going to happen in life or when their desires might change. Therefore, they choose revocable trusts because they offer the trustor the option to "edit" them.
Be in Control of Your Own Wealth. Join Wealthry.
How Does a Revocable Living Trust Work?
When you first decide that you want to establish a revocable trust, you need to decide who your beneficiaries and your successor will be.
Successor
Beneficiaries
The successor is the person who will manage the trust and distribute the assets if you die or become incapacitated.
Your beneficiaries are the people who will receive your allocated assets. These may include spouses, children, parents, or close friends.
Choosing assets
The next step is deciding which assets you want to put into the trust. The laws for trusts are different in every state. Therefore, you may have to go through a lengthy process of having titles and deeds signed over to the trust's name. You'll want to make sure that you put as many items as possible into your trust. Anything that doesn't go into the trust may have to go through probate after you pass away. We'll discuss probate later.
Making Changes
As we mentioned before, you'll have the right to make adjustments to your trust any time you so desire up until the moment you die. Once you die, your trust will become a solidified document that cannot be changed anymore. Your successor will distribute the assets to the beneficiaries the way that you instructed them to do so when you created the trust.
How Is a Revocable Living Trust Different From a Will?
You may wonder how a revocable trust is different from a will.
The biggest difference between a revocable trust and a will is that the will only goes into effect after you die. The revocable trust is effective while you are incapacitated, as well.
These are some of the other differences between a will and a revocable trust that you need to know:
Probate Court
A living trust avoids probate while a will does not. Probate court is a meeting during which a judge looks at a deceased person's last will and testament and verifies it. No assets can be distributed until the will goes through probate court. It could be months before the beneficiaries receive their asset distributions from a will because of probate court. The revocable trust doesn't work that way. The successor takes over the trust after the trustor dies and can begin distributing assets immediately.
Privacy
Revocable trust information remains private. The information in a will goes public after the person's death, and anyone can gain access to it and find out which beneficiaries received which assets. Therefore, a revocable trust might be best for you if you value privacy.
Notary and Witnesses
Your revocable trust will require a notary to stamp it for it to be legal. A living will may not require the notary. However, a living will requires witnesses, whereas a trust will not. Check the laws in your state to find out more about will and trust requirements.
Property Transfers
Revocable trusts do sometimes require you to go through complex processes, such as transferring your properties into the name of the trust. You will not have to do that if you want to allocate your assets through a will.
Court Challenges
On the other hand, a revocable trust will protect you from having challenges in court. The document is cut and dry. Everything is established, and the successor can start distributing the assets straightaway. Wills sometimes go through court challenges along with the probate process, which can be lengthy.
Conservatorships
If you have a revocable trust, there will never be a need for a conservatorship. A conservatorship is a situation in which a court appoints a person to manage an incapacitated person's finances. You run the risk of having a conservatorship if you choose to execute a will rather than a revocable trust.
Guardians for the children
You can do some things with a will that you can't do with a trust. One of them is to appoint people as guardians of your children. You will need to consider creating a will if you have minor children, and you need to appoint someone to take guardianship of those children when you pass away. You can also name property managers for your children's property in a will, which is something you can't do with a revocable trust.
Executors
A will document will allow you to appoint an executor, and a trust will not. An executor is someone who watches over things to ensure that the deceased person's wishes are being carried out appropriately.
Tax Debts
You can decide how your tax debt is paid when you have a will. That option isn't available with a trust.
Ease of Creation
Overall, a living will is much easier and less complex to create. You can opt to create a will on your own. However, if you do that, you must keep in mind that you have to meet the requirements of making it legal. Again, you should check your state laws so that you know all the requirements you need to meet before you make a will.
Do I Need a Trust if I Have a Will?
Many people wonder if they need to create a will if they already have a trust.
The best course of action to take might be to have both documents.
We say this because there are some things you can't cover in a trust that you can cover in a will and vice versa. Additionally, your will can act as a supplement to your trust. For example, you can specify in your will that all of the assets that you did not put into the trust go directly into the name of the trust upon your passing. That might prevent your family from having to go to probate court about those items.
What's an Irrevocable Trust?
An irrevocable trust is the opposite of a revocable trust. Its terms are set in stone and cannot be changed at any time. You can change a revocable trust any time you want to while you're alive. Once you die, the revocable trust converts to an irrevocable trust, and everything must be carried out the way the trust instructs them to be carried out.
Irrevocable trusts can be beneficial to certain people. For example, doctors, lawyers, and other professionals might want to open an irrevocable trust because they are vulnerable to lawsuits. The trust will remain safe even if these persons lose a suit and have to pay the person who won the case.
What Are the Benefits of a Revocable Trust?
As mentioned before, the greatest benefit of having a revocable trust is that you can make changes to it any time you want. You can remove a family member from being a beneficiary if you no longer want that person to have the payout. You can add or remove assets, or you can shut the trust down altogether. You have complete control of everything going on with the trust. It's an excellent option if you like to have full control.
Skipping probate court is probably the next most important benefit of having a revocable trust. You won't want your family members to have to wait a long time before they can start utilizing the funds and property you leave them with when you pass away. A revocable trust will protect them from the probate court experience. They'll gain quick access to the funds they need to survive and carry on the family's obligations.
What Are the Disadvantages of a Revocable Trust?
Just as there are many benefits to opening a revocable trust, there are also a few disadvantages.
One disadvantage of a revocable trust is that you may have some high expenses if you have to hire an attorney to help you. You will need someone to draft the document and put the appropriate provisions in it. If you're going to open a trust, you might as well do it the right way. Other documents, such as wills, don't require the assistance of an attorney. There are less fees involved because of this.
Another disadvantage is funding the trust. This is more of an inconvenience than it is a disadvantage. Your trust is not a trust until you fund it with the properties and assets that are supposed to go inside of it. That may require you to go through processes that involve a lot of paperwork and time. It's well worth the extra time, however. Anything that you leave out of the trust is likely to get caught up in the world's legal system. Such property may have to go through probate court before it can be distributed to the family members.
Another disadvantage to a revocable trust is that the property within the trust is difficult to refinance. This is because the property's ownership is within the trust. There is a way around it, however. If need be, the trustee can remove the property from the trust so that the lenders can refinance it if they are willing.
One more area of disadvantage is that there is no court supervision in the case of a revocable trust. With a will, the court oversees how everything is distributed. No one has the freedom to carry out the will's wishes in any other way than that of the deceased party. The revocable trust does not have this element. Therefore, the trustee could do something with the deceased party's estate or assets that was not intended. Of course, the beneficiaries would then have the right to sue the trustee, but they would have to be aware of the wrongdoing first.
How Do I Set Up a Revocable Living Trust?
The best way to set up a living trust is to contact an attorney and have that person draw it up. You could go the way of doing it yourself, but the process is so complex that a DIY may not be the best way to go. An attorney knows the ins and outs of the process and can help you to choose the appropriate beneficiaries and a successor who will act on your behalf when you are no longer here. It's always good to have a legal advisor at the very least. You don't want to make any mistakes in this important document. Of course, you do have the right to revise it if you want to, but you may not have to if you secure the appropriate legal counsel. The process of creating a revocable trust can be quick and smooth if you choose someone who has experience in the field and has done the process many times.
Do I Need a Financial Planner?
We'll never try to tell you that you have to have a certain professional in your life to make good choices. However, it's always good to have an expert financial advisor's insight and suggestions to ensure that you maximize your finances and your family's future.
A financial planner can help you with a variety of topics, not just your revocable trust options. A financial planner can help you save as much money as possible and improve your money handling skills, as well. This person can coach you on signing up for the best retirement plans, as well. We won't tell you that you have to hire a financial planner, but we won't tell you that you won't benefit from it either. This person will be nothing but an advocate to you as we are.
Contact Us if You Need Additional Information
Now you know all about revocable trusts and how they work. You can now make an informed decision about whether you want to invest in a revocable trust or not. Don't hesitate to reach out to us if you have any questions or concerns about this topic. We are a finance advocate that covers a broad range of topics under the personal finance umbrella. We aren't a lender, but we can connect you with lenders from all fields of personal finance.
We also have connections to estate planning experts, tax specialists, credit counselors, and more. You can reach us by telephone or short form to talk to one of our knowledgeable and trustworthy agents. The agent will ask you a series of questions to get an idea of what you need, and then he or she will lead you to it.
You can also search our database of blogs, articles, and other writings and locate pieces on the topics you need help with. For example, if you are planning to start saving money, we have a list of some of the best savings account options out there. Take a look at the table below, and pick the one that works best for you:
Our goal is to give you the knowledge you need to take charge of your finances for now and for the future. Take a minute to reach out to us. We'll be delighted to hear from you.