A revocable living trust is a type of agreement that allows you to manage and distribute your assets during your life and after your death. It is often referred to as a “living trust” or “revocable trust”. This type of trust offers many advantages, such as avoiding probate, protecting assets from creditors, and providing for young children. However, there are also some drawbacks to consider.
A revocable living trust is unique because you will often hold all three positions: donor, beneficiary, and trustee. This means that you can retain control of your assets even if the trust is the owner of the assets. You can make the same provisions for young children in a revocable living trust as you would in a will. In a revocable living trust, a second person or a corporate trust department must always be appointed to act if the first trustee dies, resigns, or is unable to continue managing the property. For most estate planning purposes, the flexibility of the revocable active trust will be a good option, as it will allow you to retain control over the assets you have placed in the trust.
After creating a revocable trust, the assets must be re-titled in the name of the trust, since assets that are not formally deposited in the trust still have to go through a probate process and will not be under the management of a successor trustee in the event of incapacity. However, regardless of whether you opt for a revocable or irrevocable living trust, it's always wise to consult an attorney with experience in estate planning to help you establish the living trust of your choice. While a revocable life trust can be an excellent tool for your estate plan, there are also some drawbacks to consider. The purpose of an active trust is to keep your assets while you are alive and to distribute them according to your wishes at the time of your death. These trusts don't help you avoid wealth tax because your power to revoke or modify them means that they remain part of your estate. With a revocable active trust, the assets can be distributed to the grantor and, in the event of death, a “successor trustee” distributes the assets in accordance with the trust's legal dictates.
However, certain types of assets can still prevent probate legalization, such as retirement plans, insurance policies, annuities, and joint assets, meaning that a revocable trust may not always be necessary. It's important to remember that laws governing revocable trusts and other types of trusts may vary depending on the state in question. A revocable living trust can be an excellent tool for estate planning but it's important to understand both its benefits and drawbacks before making any decisions.