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asset protectionA revocable living trust is a very valuable estate planning tool. One thing that you should understand right off the bat about a revocable living trust is that it can be useful for you, even if you are not a multimillionaire.

In fact, a revocable living trust is not the right choice for some very high net worth individuals. This is because of the fact that a revocable living trust does not provide asset protection, and it does not provide estate tax efficiency.

The estate tax would be applicable on asset transfers that exceed $5.45 million in value. If the value of your estate does not exceed this amount, you don’t have to worry about the estate tax.

The reason why a revocable living trust does not protect assets from creditors or the IRS is because of the fact that it is in fact revocable. This is a bad thing if you want to separate yourself from your assets, but it can be a good thing for some people.

Since you can revoke the trust, you can change your mind and take back the assets at any time. Plus, you can act as the trustee initially, and you can also act as the beneficiary. This gives you complete control. While the trust is intact, you control its actions, and you can dissolve the trust entirely if you choose to do so.

A trust that would protect assets and/or provide estate tax efficiency would not be a revocable trust. Trusts that accomplish these aims are irrevocable trusts. As the name indicates, you cannot revoke this type of trust, so you are surrendering incidents of ownership.

The trust is the owner of the assets; you can’t take them back, so they are protected from litigants seeking redress from you personally. They would also be removed from your estate for estate tax purposes.

However, we should point out the fact that a revocable living trust can provide a certain level of asset protection to the beneficiaries after you pass away.

Attend a Free Seminar

If you would like to learn more about living trusts, asset protection, and other important estate planning topics, attend one of our free seminars. We offer these sessions on an ongoing basis throughout various locations in southwest Florida, and you can visit our seminar schedule page to see the upcoming dates.

Value of Revocable Living Trusts

When you find out that revocable living trusts do not protect assets while you are living, and they do not provide tax efficiency, you may wonder why you would want one. This is understandable, but in fact, these trusts are very useful.

If you were to use a last will to facilitate asset transfers after you pass away, the heirs could not receive their inheritances in a timely manner. The executor that you name in the document would be forced to admit the will to probate. This is the legal process of estate administration.

Probate serves a purpose, but it does not necessarily serve the purposes of the heirs to the estate. This process can be time-consuming, with the exact duration of the process depending upon the circumstances. Even if there are no snags, and the property is relatively simple to distribute, the probate process will take close to a year in most areas.

Plus, there are considerable expenses that can accumulate during probate, and it is a public proceeding. Anyone who wanted to find out how you planned your estate could access probate records to get all the facts.

On the other hand, if you were to use a revocable living trust as your primary vehicle of asset transfer, probate would not be a factor. After your passing, the trustee would follow your instructions and distribute assets to the beneficiaries in accordance with your wishes outside of the probate process.

You would have the ability to instruct the trustee to distribute assets over an extended period of time if this is your choice, and this can be comforting if you have a spendthrift beneficiary.

Probate avoidance is one major advantage that you gain when you utilize a revocable living trust. Another benefit is the ability to prepare for possible incapacity.

A significant percentage of elders become unable to handle their financial affairs eventually. There are various different underlying causes, but Alzheimer’s disease is a leading culprit. This disease strikes around 45 percent of people who are at least 85 years of age.

When you have a revocable living trust, you could empower a disability trustee to administer the trust in the event of your incapacitation.

Attend a Free Seminar

If you would like to learn more about living trusts, asset protection, and other important estate planning topics, attend one of our free seminars. We offer these sessions on an ongoing basis throughout various locations in southwest Florida, and you can visit our seminar schedule page to see the upcoming dates.

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