Learning About Trusts - The Revocable Living Trust and the Benefits of Using One
By Don Drake, Connelly Law Offices, Ltd.
"A revocable living trust is an estate planning tool that offers a high degree of flexibility and control over the distribution of your assets," said professional fiduciary and certified elder law Attorney RJ Connelly III. "With this type of trust, you can transfer ownership of your assets into the trust while you're still alive and appoint a trustee to manage those assets for your benefit and that of your beneficiaries during your lifetime. The trust is revocable, meaning you can modify or revoke it at any time while alive, giving you complete control over your assets and their distribution."
One of the most significant advantages of a revocable living trust over a will is that it allows you to maintain control over your assets even if you become incapacitated. If you cannot manage your affairs, the trustee can step in and manage the assets on your behalf, ensuring your wishes are still fulfilled. Additionally, a living trust avoids the need for probate, which can be a lengthy and expensive process, and it can also help to protect your privacy since it does not become part of the public record.
"Another great benefit of a revocable living trust is that it can be tailored to your specific needs and circumstances," said Attorney Connelly. "For example, you can include provisions that allow for the ongoing care of a loved one with special needs or that provide for the education of your children or grandchildren. You can also choose to include charitable donations or other causes that are important to you."
A revocable living trust also allows people to designate who will receive their money and property once they die. This can be especially important for those who have minor children or family members with special needs. The trust can also be used to provide for loved ones who are not good with money or may be vulnerable to financial predators.
"Overall, a revocable living trust effectively ensures that your assets are managed and distributed according to your wishes while providing flexibility and control over the process," stated Attorney Connelly. "If you're considering estate planning options, it's worth consulting with an experienced and knowledgeable estate planning attorney or professional fiduciary to determine whether a living trust is right for you and review the benefits of creating one."
Revocable versus Irrevocable
"We recently did a blog on irrevocable trusts, so now is an excellent time to compare the two and briefly review the irrevocable trust," said Attorney Connelly. "With a revocable trust, the grantor has full control over the trust and may change it as needed. This means that the grantor can update beneficiaries, modify the amount of money or assets designated to the trust, and decide when the assets will be distributed. On the other hand, irrevocable trusts are inflexible. Once they are created, they cannot be easily changed. However, there are some exceptions where changes can be made if all beneficiaries agree to them. Even then, the proposed modifications must go through a lengthy approval process, including before a judge."
In addition to the difference in flexibility, there are other important distinctions between revocable and irrevocable trusts, such as issues of privacy, tax benefits, and probate court. For example, revocable trusts may offer privacy benefits by avoiding probate court, whereas irrevocable trusts can provide tax benefits by removing assets from your taxable estate.
"I can't stress enough how important it is to review your revocable trust every three to five years to ensure that it still contains the assets you want and that the beneficiaries remain the same," continued Attorney Connelly. "For instance, you may want to add a new grandchild to your trust as a beneficiary. Remember, consulting with an experienced estate planning lawyer is always best if you're unsure which type of trust suits you. They can help you determine the best options for your situation and guide you through creating a trust that meets your needs."
Please note that the information provided in this blog is not intended to and should not be construed as legal, financial, or medical advice. The content, materials, and information presented in this blog are solely for general informational purposes and may not be the most up-to-date information available regarding legal, financial, or medical matters. This blog may also contain links to other third-party websites that are included for the convenience of the reader or user. Please note that Connelly Law Offices, Ltd. does not necessarily recommend or endorse the contents of such third-party sites. If you have any particular legal matters, financial concerns, or medical issues, we strongly advise you to consult your attorney, professional fiduciary advisor, or medical provider.