07 Sep Revocable Living Trusts – Is It Right For You?
Trusts are not only for the very wealthy. For years, a Will was the “go to” choice in how assets should be divided, but in some cases, the most popular choice may not be the best choice.
A revocable living trust is a device that will allow you to remain in total control of your assets.
The players involved with a revocable living trust include:
The grantors are the individuals that established the trust; a Trustee is the person who is appointed to handle all the administrative tasks associated with the Trust, and finally, the beneficiary is the person who is due to be the recipient of the monetary distribution of the Trust. Multiple beneficiaries can be named, and there can be more than one Trustee.
Thanks to the name, it is easy to deduce that this type of trust can be dissolved easily, and the assets will once again be the personal property of the originator.
The assets would be distributed, by the Trustee(s) to the beneficiaries, according to the specific instructions set forth in the Trust.
Some advantages associated with a Revocable Trust include (but is not limited to), that it is not subject to the process of probate. A Will, on the other hand, can be probated after your death. This is good news, because a probate can take a minimum of nine (9) to twelve (12) months to complete, and it is a costly process (monies that could have filled the pockets of the inheritors).
Another great advantage involved is an incapacity protection. Alzheimer’s disease strikes more than 40% of elders who are over the age of 80. Many times, people do not account for mental incapacity, and in turn, do not prepare to appoint a guardian to oversee their financial affairs. When a Trust is in place, appointing a guardian would not be necessary, as the trustee named in the original terms of the agreement of the Trust will be able to handle all aspects of the Trust in the event of mental incapacitation.
Typically, upon death, a revocable trust turns into an irrevocable trust, and this basically means that it cannot be changed, altered or modified.
Some other types of Trusts include, but are not limited to:
Asset Protection Trust is designed to protect the assets from creditors staking a claim.
Charitable Trusts are created so that specific charities will benefit from the assets of an Estate. These types of Trusts are usually established as part of the overall Estate Planning to lower tax consequences.
Constructive Trust is established by the court system, and it is based on certain circumstances and facts. It may be deemed by the court, that even though a formalized trust was not written up, the intention was strongly implied that the property owner intended that certain property would be going to a certain person or was to be used for a certain purpose.
Tax By-Pass Trust is when a spouse leaves monies or property to their spouse, and in turn, this type of trust minimizes the amount of tax that would have been incurred upon death. Assets pass to the spouse tax free, but when the surviving spouse dies, if the remaining assets are over the tax exemption limited, the heirs of the couple would be taxed at a rate higher than 50%. Depending on the size of the Estate, this type of Trust can save children thousands of dollars in Federal tax payments.