A revocable living trust is a legal device that can be used to facilitate asset transfers to your loved ones after you pass away. Many people think that you have to be wealthy to benefit from the creation of a trust, but in fact, this is not the case with a revocable living trust.
Let’s look at the facts.
Anatomy of a Living Trust
If you were to decide that you want to create and fund a revocable living trust, you would be called the grantor of the trust. The grantor will name a trustee, and this is the entity or individual who will be charged with the trust administration duties. Typically, the grantor will act as the trustee throughout his or her life.
A beneficiary would also be named in the trust agreement. There can be multiple beneficiaries, and once again, the grantor will usually act as the beneficiary at first.
The grantor would name a successor trustee to administer the trust after his or her passing, and successor beneficiaries would also be named. We should point out the fact that the successor trustee could be empowered to administer the trust if the grantor was to become incapacitated.
This is a key benefit, because a very significant percentage of seniors become incapacitated late in their lives. Alzheimer’s disease is not the only cause of incapacity, but this disease alone strikes around 45 percent of people who are at least 85. If you empower the successor trustee to administer the trust in the event of your incapacitation, a representative will be poised to act if you become unable to handle your own affairs.
Living Trust Benefits
Why would you want to consider the utilization of a living trust as an alternative to a last will? There are a number of different benefits that you would derive. As we have already stated, you would obtain the ability to address the possibility of incapacity late in your life.
Secondly, you retain control of the assets in the trust while you are alive and well. As the grantor and the beneficiary, you manage the activities of the trust, and you can take monetary distributions as you see fit.
Since the trust is in fact revocable, you can actually dissolve or rescind the trust entirely if you ever choose to do so. The assets in the trust would once again become your sole and direct personal property if you revoke the trust.
When you create the trust, you compose a trust declaration. In this declaration, you can leave specific instructions that the successor trustee would be compelled to follow regarding postmortem asset distributions. You do not have to allow for lump-sum distributions of all of the assets in the trust immediately after your passing.
To explain how this can be beneficial, let’s say that you have a beneficiary who is not a good money manager. You are concerned about this loved one spending his or her inheritance too quickly. A lump-sum inheritance could go up in smoke, and the beneficiary could suffer financial hardships later.
Under these circumstances, you could instruct the trustee to distribute limited assets on a monthly basis over an extended period of time. If you want to, you could give the trustee the discretion to make additional distributions under certain circumstances. Perhaps you could allow for a larger, lump-sum distribution when the beneficiary reaches a certain age.
Through the inclusion of a spendthrift provision, there would also be asset protection from the beneficiary’s creditors.
This is one example, but you have the ability to leave behind stipulations that the trustee must follow if you create a revocable living trust.
Changing Living Trust Documents
People sometimes shy away from trust creation because they are under the impression that things are permanently set in stone once you establish a trust. This is not the case when it comes to a revocable living trust. You can change the living trust documents at any time.
If you want to change your beneficiary designations, you could do so, and you can change the successor trustee. You can also convey assets into the trust after you originally establish it, so there is a great deal of flexibility.
Schedule a Consultation
When you digest this information, you may feel as though you would like to establish a revocable living trust. Our firm would be glad to help if you are ready to take action. To set up a consultation, give us a call at 239-225-7911 or send us a message through our contact page.