Revocable Living Trusts
Estate planning is an essential aspect of financial planning for individuals and families. It involves the creation of legal documents that outline the distribution of assets and property in the event of death or incapacitation. However, it is important to note that estate planning tools are not one-size-fits-all solutions. The specific needs and circumstances of each individual or family must be taken into account when creating an estate plan.
One of the most common estate planning tools is a will. A will is a legal document that outlines how assets and property will be distributed after the individual’s death. However, a will is only effective after death and does not provide any protection in the event of incapacitation. Additionally, a will must go through probate, a legal process that is typically very public, time-consuming, and costly.
Another estate planning tool is a living trust. A living trust is a legal document that allows individuals to transfer assets and property into a trust during their lifetime. This allows for the assets to be distributed according to the terms of the trust, without the need for probate.
Revocable Living Trusts came about during Medieval Times when there was a good chance you would not come back from your trip to your brother’s wedding. The trip would be long, arduous, and so you did not want to bring the kids. You did not want to leave the kids unattended, or unprovided for, so you entrusted your property to a trusted friend, or relative (a trustee if you will), who could use the property for the benefit of the kids (the beneficiaries of your trust). But, you didn’t want to just give the friend or relative your property, because what if you made it back? So, the revocable living trust was created. Needless to say, living trusts can be complex and may require the assistance of a lawyer.
The main difference between irrevocable and revocable living trusts is that an irrevocable trust cannot be changed or revoked after it is set up, while a revocable trust can be changed or revoked at any time by the person who created it.
Irrevocable Trusts:
- Once it is set up, the person who created it cannot change the terms or revoke the trust.
- The assets in the trust are removed from the person’s estate, which means that they are not subject to estate taxes.
- The assets in the trust are not accessible to creditors of the person who created the trust.
Revocable Trusts:
- The person who created the trust retains control over the assets and can change the terms of the trust or revoke it at any time.
- The assets in the trust are still considered part of the person’s estate, which means that they are subject to estate taxes.
- The assets in the trust are accessible to creditors of the person who created the trust.
Both types of trusts can be useful in different situations, and which one is right for you depends on your specific goals and circumstances. It’s important to consult with a qualified attorney or financial advisor to determine which type of trust is right for you.
Estate planning tools are not cookie-cutter documents that are good for everyone. Each individual or family’s needs and circumstances must be taken into account when creating an estate plan. It is important to consult with a lawyer or financial advisor to determine which estate planning tools are appropriate for your specific situation.
In addition to wills and trusts, there are other estate planning tools available, such as guardianships for minor children, powers of attorney, health care directives, and life insurance policies. Each of these tools serves a specific purpose and can be used in different ways to protect your family, assets and property. It is also important to note that estate planning is not a one-time event, but rather an ongoing process that should be reviewed and updated regularly.
In conclusion, estate planning is an important aspect of financial planning, but it is essential to understand that estate planning tools are not cookie-cutter documents that are good for everyone. The specific needs and circumstances of each individual or family must be taken into account when creating an estate plan. It is recommended to consult with a lawyer or financial advisor to determine the appropriate estate planning tools for your specific situation and to review and update your estate plan on regular basis.
