Throughout our combined years of practice, we have found that many people still come to us with misconceptions about how trusts function. Some believe that trusts are only for the wealthy or that a simple will can meet their estate planning needs. While both of these may be true to an extent, trusts can do much more than many people realize.
Here are three ways that a person of any financial background can benefit from a revocable living trust
When a person dies without a trust, a judge oversees a probate proceeding to administer the decedent’s assets and debts. In probate court a decedent’s will — if they had one — is public and must be reviewed and approved by a judge. Unfortunately, this isn’t always a smooth process. Probate can take time, money and an emotional toll on a decedent’s loved ones. A properly funded trust can avoid the headache of probate and expedite the estate administration process.
If a trustor is incapacitated, they will no longer be able to serve as a trustee. Trustors – or a trust’s creators – can choose who their successor trustees will be. The successor trustee or trustees will have the ability to manage the affairs of the incapacitated trustor as opposed to a court-supervised guardian or conservator. As with probate proceedings, guardianship court proceedings are also open to the public in most cases and can cost time and money.
Revocable living trusts do not offer its creators asset protections – although irrevocable trusts do. As the trustor and trustee, assets owned by the trust are still considered to be your assets since you still have full control of them. Therefore, they are fair game.
However, inherited assets that are held in trust can protect a beneficiary in case of a divorce or creditor issue. Even if a beneficiary declares bankruptcy or files for divorce, assets held in trust are off the table. In a nutshell, revocable living trusts can prevent inherited assets from falling into an unintended beneficiary’s hands.
While establishing a revocable living trust may come with higher costs initially, it may save thousands of dollars and countless hours for your trustees and beneficiaries in the end. Remember — estate planning is not only creating a plan for your death but also creating a plan for the life of your legacy.
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