What You Should Know About Revocable Trusts
Estate planning is a must for all adults. In order to properly prepare for one’s death or incapacitation, it is highly beneficial to understand the tools and documents that may compose an all-encompassing estate plan. Recognizing the terms and stipulations of a revocable living trust can be a huge help when determining how to allocate and distribute assets. A revocable trust may or may not be the perfect fit for your estate plan (perhaps an irrevocable trust is better suited to your needs), but it is equally important to comprehend the functions of this type of trust.
1. Revocable trusts may be updated over time.
The trustmaker, or grantor, is responsible to creating the terms of the trust and for determining which assets will be included in the trust. The provisions in a revocable trust can be revised and updated at any time during the life of the grantor. This is an ideal accommodation for someone who expects major life changes in the years to follow, or would like to revisit the terms of the trust as they progress in life. For example, someone who unmarried with no children (and expects both in the future) could make use of a revocable trust. Beneficiaries can be added and removed according to the grantor’s changing preferences.
2. Upon death, the revocable trust cannot undergo any further revisions.
When the grantor is deceased, the trust automatically becomes an irrevocable living trust, which means the terms and contents of the trust may no longer be changed. Provisions of the trust go into effect following the death of the grantor. At this stage, the trustee is responsible for distributing the contents of the trust, which may include financial accounts, real estate, and other assets. The assets are dispersed among heirs named in the trust. A trustee is also authorized to administer items in the trust should the grantor become incapacitated.
It is also worth noting that living trusts are not subject to probate upon the grantor’s death. This minimizes the time and resources that would otherwise be spent in state probate court determining the distribution of the assets.
3. A revocable trust is not the only solution to estate planning.
Even with a well-developed revocable living trust in place, other estate planning documents are essential. Advance directives, for example, center on medical treatment preferences. In the event of an incapacitating medical emergency, an advance directive will empower you to have your wishes met and allow a designated agent to make medical decisions on your behalf.
An irrevocable living trust has its own benefits, such as security from creditors and estate taxes. It is possible that you may find the terms of an irrevocable trust to be ideal for your particular situation.
A will is another document that will cover important ground and protect your desires. This will allow for the distribution of property and assets not held in a trust, important guardianship and pet care preferences, and other specified final wishes.