It is important to understand all of your options when you are planning your estate. You may automatically assume that you should use a last will. While you can certainly go this route, you may also want to consider the creation of a revocable living trust.
There are those who assume that trusts are only useful for the wealthy. This is not the case. Revocable living trusts can be beneficial for people of relatively ordinary means.
When you convey assets into a revocable living trust, you are called the grantor of the trust. The trust is comprised of a beneficiary or beneficiaries who will receive monetary distributions out of the trust, and the trustee who will administer the trust.
As the grantor of a revocable living trust, you can act as the trustee and the beneficiary initially. As such, you do not surrender control of the assets that you have placed into the trust. Because it is revocable, you can actually revoke or rescind the trust, and it would no longer exist.
When you create the trust you spell out your wishes in a trust agreement. As the grantor, you can change the terms of the trust along the way. You could add or remove beneficiaries, and you could alter the distribution terms.
Value of Revocable Living Trusts
When you create a revocable living trust, you are facilitating a smooth and efficient transfer of assets to your loved ones after you pass away. The trustee follows the terms of the trust to distribute resources to the beneficiaries according to your wishes. Unless there is a challenge to the trust, there are no legal impediments.
Things are different when you use a last will to state your final wishes. If you use a will, the executor must admit the will to probate. The administration of the estate would take place under the supervision of the probate court.
Probate can be a time-consuming process. The exact duration varies depending on the complexity of the case in question. A relatively routine case could pass through probate in approximately nine months to a year.
In addition to the time factor, there is the expense factor. Costs can accumulate during probate, and this is another one of the drawbacks.
Probate avoidance is a big benefit that you gain when you create a revocable living trust. In addition to this, there is also the matter of incapacity planning.
A significant percentage of senior citizens become unable to handle their own financial affairs late in their lives. If you do nothing to prepare for this eventuality, the court could be petitioned to appoint a guardian to act on your behalf.
This is not necessary if you have a revocable living trust. You could name a successor or disability trustee, and this individual or entity would be empowered to administer the trust in the event of your incapacitation.