There are many different tools in the estate planning toolkit, and you should understand your options and make informed decisions. You may assume that you should use a last will if you are not a multimillionaire, but in fact, you may want to consider the utilization of a revocable living trust.
If you have a living trust, you should also have a certain type of will called a pour over will. Before we explain, we should take a look at some of the reasons why you may want to use a living trust instead of a last will as your primary asset transfer vehicle.
No Loss of Control
Many people think that you surrender personal control of assets that you convey into any type of trust. This is not the case when it comes to a revocable living trust.
Part of the picture is self-evident: The trust is in fact revocable, so you can revoke or dissolve the trust if you choose to do so.
Assets that you had conveyed into the trust would once again become your direct personal property if you were to revoke the trust, so there is no risk involved. You can change your mind and take back the assets.
Anatomy of a Revocable Living Trust
If you were to create a revocable living trust, you would be called the grantor of the trust. A trustee would be named to administer the trust, and you would also name a beneficiary to receive monetary distributions from the trust.
Even though you are the grantor of the trust, you can act as the trustee and the beneficiary while you are alive and of sound mind. Most people will assume these roles and maintain control of the trust throughout their lives.
Since you are the trustee, you control the actions of the trust. As the beneficiary, you can accept monetary distributions and use the resources as you see fit.
Postmortem Asset Transfers
The ultimate goal of the trust is to facilitate postmortem asset transfers. To make this happen, you name a successor trustee to administer the trust after you die.
You could use someone that you know to act as the successor trustee, but it is also possible to engage a professional fiduciary such as a trust company. For many people, a corporate trustee is the best choice.
There would be no longevity concerns when you use a professional trustee, and you could be certain that the funds in the trust are properly managed with no conflicts of interest.
In the trust declaration you would also name a beneficiary or beneficiaries to succeed you, and you would leave instructions that the trustee must follow after your passing.
With regard to instructions, you could allow the trustee to distribute assets on a limited basis over an extended period of time. You do not have to allow for lump sum distributions after your passing, and this is one of the advantages that you gain when you create a revocable living trust.
The distributions that are made by the trustee in accordance with your wishes would not be subject to the legal process of probate. If you were to use a last will instead of a revocable living trust as a primary vehicle of asset transfer, the probate process would enter the picture.
This can slow things down considerably. The heirs to the estate cannot receive their inheritances until the estate has been probated and closed by the court. Even if there are no complications, this is going to take close to a year in most places.
Assets that are contained within a revocable living trust can be transferred to the beneficiaries in a much more timely manner, as long as there is ample liquidity available immediately after your passing.
Incapacity Planning
Many elders become incapacitated late in their lives. If you have a revocable living trust, you could empower the successor trustee to manage the trust in the event of your incapacitation. This is another advantage that you gain when you create a revocable living trust.
Pour Over Will
If you have a revocable living trust, you may not convey all of your property into it for one reason or another. To consolidate your estate, you could allow the living trust to absorb the property that was never conveyed into the trust through the inclusion of a pour over will.
The trustee would ultimately be able to distribute this property along with the other property that you transferred into the trust during your lifetime.
Attend a Free Seminar
To learn more about the value of revocable living trusts, attend one of our free seminars. We are offering a number of seminars over the upcoming weeks, and you can visit our seminar schedule page to obtain details and registration information.
