Creating an estate plan generally requires you to consider how you want your loved ones to receive their inheritance, any special considerations you have and what type of protections you want for them.
One option you may consider is a revocable trust. There are different types that you can look into once you determine that this is the overall structure you want to use.
Purpose of revocable trusts
Revocable trusts, also known as living trusts, are created during a person’s lifetime to hold assets, which can be managed and passed on to designated beneficiaries. The primary purpose of establishing a revocable trust is to provide a flexible and private means of property management and distribution upon the grantor’s death by bypassing the often lengthy and public probate process.
Benefits of revocable trusts
One of the key benefits of revocable trusts is the control they offer the grantor. Since the trust is revocable, the grantor can make changes to the trust terms, amend beneficiaries or dissolve the trust entirely at any time before their death. This flexibility is particularly advantageous in situations where the grantor’s intentions or circumstances change.
Additionally, revocable trusts can provide a seamless transition of asset management if the grantor becomes incapacitated, as the successor trustee can take over without the need for court intervention. Privacy is another significant benefit, as the details of the trust and the distribution of assets don’t become a matter of public record.
Considerations
While revocable trusts offer many advantages, there are important considerations to keep in mind. Since the trust is revocable, assets within the trust are considered part of the grantor’s taxable estate, which could have implications for estate taxes depending on the size of the estate. Additionally, revocable trusts don’t offer protection against creditors during the grantor’s lifetime because the assets are still considered the grantor’s personal property for legal and tax purposes.
Remember, a revocable trust is only one component of a comprehensive estate plan. Working with a legal representative who understands your wishes and circumstances can help you to learn more about how to achieve your unique estate planning aims.
