Advantages of the Revocable Living Trust
Estate Planning is the process of planning for the distribution of assets to selected beneficiaries at death. Basic estate planning includes the following legal documents: The declaration of health care surrogate (or health care directive), living will, durable power of attorney, last will and testament and/or revocable living trust. Not every person needs a revocable living trust in their estate planning, but there are several advantages to having a revocable living trust in an estate plan that everyone should know.
First, a revocable living trust serves as a great probate avoidance technique for those assets that cannot avoid probate by themselves. Assets held jointly or with beneficiary designations avoid probate automatically. For example, a life insurance policy with a beneficiary designation passes automatically to that beneficiary outside of probate. You can also have alternate beneficiary designations in the event that your initial beneficiary predeceases. Another example is a home that is titled as husband and wife or jointly will pass outside of probate. In this case, there will only be a probate issue on the second or last death. A final example of an asset that avoids probate is a joint bank account or a bank account with a payable on death beneficiary. It is important to note that these three examples are not the only probate avoidance strategies. Each asset needs to be inventoried and reviewed separately on a case-by-case basis.
Another advantage to a revocable living trust is the ability for a settlor (or grantor) to set limits on the distributions. This is used often with trust funds for children who are not old enough to responsibly handle trust assets on their own. Limitations can prevent other spendthrift family members (such as those with substance abuse problems) from wasting trust assets quickly. Limitations can further protect children in the case of second and third marriages to make sure that the assets reach the children (while still allowing for the care of your latest spouse).
Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.