If you’re thinking about estate planning, a revocable living trust is perhaps the most important planning strategy you should consider. Revocable living trusts are a powerful estate planning tool that can offer protection for you and your family’s future. Let’s get into why a living trust can be such an important part of your estate plan.
What is a Revocable Living Trust?
A revocable living trust is a legal document that gives instructions for what you want to happen to your assets if you are incapacitated and when you die. Unlike a will, a living trust can help your estate avoid probate, prevent the court from controlling your assets if you become incapacitated, and give you control of the assets you leave to your loved ones.
Living trusts allow flexibility and customization, so you can choose where and when your assets are distributed and make changes any time.
Do I Need a Revocable Living Trust?
There’s a perception that living trusts are primarily for the very wealthy, but the reality is that living trusts can provide benefits to many “regular” people who are not wealthy in the traditional sense. A revocable living trust is a great foundation for an estate plan. In the long run, setting up a living trust can even end up costing you less than a will, since your loved ones should be able to avoid expensive probate procedures at both incapacity and death.
Reasons to Consider a Revocable Living Trust
1. Avoid probate
Unlike a will, a living trust can allow your loved ones to avoid a long and costly court-managed probate process when you pass away. When setting up a living trust, you’ll transfer title of assets from your individual name to the name of your trust. As the grantor (creator) of the trust, you still have total control of your assets, meaning you are still the “boss,” but the court will not be involved in controlling and transferring your assets upon incapacity and your passing.
If you happen to own real estate in multiple states, using a living trust should allow you to avoid multiple probate proceedings and save your family even more potential headaches in the future.
2. Can save you and your loved ones money
While living trusts are initially more expensive than wills since they’re more involved legal documents, they can save you and your loved ones a lot in the long run. Probate expenses typically add up to 3%-7% of the total estate value, so helping your family avoid these fees can save them a substantial amount of money after your passing.
Revocable living trusts are also harder to contest than a will, which may also save your loved ones both time and money. Additionally, if you are married, a living trust can be used to reduce or even eliminate your estate taxes, depending on the size of your estate.
3. Avoid court control of your assets at incapacity
Living trusts allow you to put a contingency plan in place in case of your own incapacity. When you set up the trust, you’ll appoint a trustee and successor trustee to manage your assets.
Typically, you would be your own trustee. However, in certain circumstances you might appoint a person or organization as your trustee. Either way, you can also name multiple successor trustees to manage your assets if you become incapacitated, allowing you to give control to someone you trust instead of the court.
4. Maintain your privacy
A living trust is a private legal document, and in most states, including Minnesota, it will not become a part of the public record. No one should be able to find information about the distribution of your estate without your consent. A will, on the other hand, is a public record that prevents you from keeping your estate details private, including information about your assets and names of your heirs and beneficiaries.
5. Flexible distribution to beneficiaries
A living trust allows you to control who will receive your assets, as well as when and how they will receive them. Upon your death, assets can be distributed to beneficiaries as soon as your successor trustee wraps up your final affairs, often a much quicker process than court-managed probate.
However, you can also choose to keep your assets in the trust, managed by your successor trustee, until your beneficiaries reach a certain age. You can even have the money distributed in installments to help ensure your beneficiaries spend it wisely. This flexible distribution of assets is an effective and customizable way to protect your family’s future.
6. Can be changed or revoked at any time until your incapacity/death
As the name implies, you can revoke or modify your revocable living trust at any time. The flexibility to update your plan when changes occur in your life allows you to ensure your family is being protected. For revisions to your living trust, like naming a new trustee, successor trustee, or beneficiary, you’ll want the guidance of an experienced living trust attorney.
7. Can be managed by an experienced trustee
If you don’t have the time, ability, or desire to manage your own trust, you can appoint a professional corporate trustee. A corporate trustee may also be a good fit if you do not have people in your life that you would “trust” to manage your trust. Corporate trustees are banks or trust companies that are experienced in managing trust assets, and also government-regulated, objective, and must follow the instructions in your trust.
Although professional trustees charge for their services, the fees are typically more than offset by their guidance and investment abilities. A professional trustee will give you the freedom to spend time with your loved ones, travel, or do whatever else you’d like without worrying about the day-to-day managing of your trust. A professional trustee will also give you assurance that your assets will managed and distributed in accordance with your wishes.
8. Gives you and your loved ones peace of mind
Due to its detailed and flexible nature, a revocable living trust allows you to plan for your future without worrying about unforeseen issues. Unlike a will, you can take steps to avoid an unintentional disinheritance, provide care for loved ones with special needs, control how your assets are distributed, and much more. You’ll get peace of mind now, and your loved ones will get peace of mind later.
Take Control of Your Future
Setting up a revocable living trust while you’re healthy and have the time to plan out your future is one of the best gifts you can give to your family. You may not think you need one yet, but taking this step proactively will give you control over your assets now and after your death or incapacity, giving you the assurance that your family will be protected.
Speaking with an experienced living trust lawyer will allow you to learn about the benefits of revocable living trusts in depth and apply them to your unique situation. Schedule a free consultation today to start taking control of your future.