Without a legal background, the world of estate planning can certainly seem complicated. While some people may understand the concept of a will, estate planning encompasses a variety of legal documents that each play a different role in making sure your assets are properly distributed after your death. Below we’ve outlined five key facts about revocable living trusts that you should keep in mind when the time comes for you to begin planning your estate.
Why is it called a Revocable Living Trust?
The word revocable implies that something can be taken back, or changed. Revocable trusts allow for changes to be made to the document, such as adding or removing assets from it. A key feature of this type of trust is that you can easily transfer ownership of your assets while maintaining legal access to them. For example, you can place your car and your home in the trust and still use both while you’re alive.
What Cannot Go into a Revocable Living Trust?
While most assets can be put into a revocable living trust, a life insurance policy, IRA, and other financial accounts cannot be. With these accounts, you have the option to designate a beneficiary who will inherit any assets that are contained within after the owner passes away.
Why Do I Need a Trust?
Having a trust allows for your assets to be distributed according to your wishes when you pass away. Another benefit to having this document is that trusts avoid probate, making it faster and overall simpler for your heirs to receive their inheritance. You can also maintain privacy, as trusts will not be submitted to the court and open to the public. Only beneficiaries and heirs will have access to these documents.
Benefits of a Revocable Living Trust
Unlike most trusts, you can choose to become a trustee, or one of them, in order to have control of your assets. If you choose to become the sole trustee, you will have full control over your assets while you are alive. It can certainly offer some peace of mind to know that you can change these terms at any point in your life. If you are the sole trustee, you will name a successor trustee who will take control of your assets when if you become incapacitated allowing the new designee to make decisions regarding your care and finances.
Who Should Not Have A Revocable Living Trust
If you have ownership over your assets, creditors are legally allowed to come after them. So if you are in a high risk profession such as medical care, accountancy, business or real estate where facing lawsuits is not uncommon, having a revocable trust may not be of much benefit to you. This trust also may be risky if you plan on applying for Medicaid at some point in your life as the assets within a revocable trust are taken into account when determining Medicaid eligibility.
We recommend seeking a licensed estate planning attorney who will help you decide what documents are best fit for your needs. A lawyer will make sure that you understand all of your different options and that your wishes are accurately represented.