When planning for the management of your estate, an option that is very popular today is that of the Revocable “Living” Trust. Understanding its advantages and disadvantages is a must for anyone planning to use it as a method of estate management. To do that, we must understand the characteristics and definition of the Revocable “Living” Trust.
What is a Revocable “Living” Trust?
In its simplest terms, a ‘trust’ is an agreement that is set up for the management and the disposition of property. A trust agreement may, for example, exist between you and a bank, and may insist that your transferred stocks and bonds be managed and invested, with the stipulation that the dividends be forwarded to you at regular intervals. In an arrangement of this sort, you would be referred to as the ‘Grantor’ or sometimes the ‘Settler’, while the bank would be the ‘Trustee’.
The bank might be required, at the time of your passing, to distribute the assets of your trust, either to living relatives or to continue the terms of the trust for the benefit of those named as beneficiaries. It is possible for such a trust to act, in part, as a substitution for your will, and to be viewed as an agreement to the management of your investments.
By definition, the ‘Living’ Trust is one that you create and come into an arrangement with during your natural lifetime. Contrast this with the ‘Testamentary’ Trust which is established at the time of your passing by your Last Will and Testament, and which is neither revocable, nor changeable, after your death. Your Living Will is, in fact, both revocable and amenable, meaning that you can cancel at any time, and revert the management of your estate back to yourself.
It is legal in many states to act as the Sole Trustee for your estate if you do not require the additional services of investment and management while you are alive. You are also able in many parts of the country to act as the Co-Trustee along with your spouse, and you can additionally name a Trust Successor Trustee to take over should you be incapacitated or pass on. You also have the option of choosing to pass all your trust property on to your family in the event of your passing.
There are, however, many good reasons that a person may choose to continue the trust after they have passed. These reasons can include knowing that this can create enormous tax benefits while providing the valuable services of investment management, tax oversight, and accounting. Continuing the trust can also prove useful to protect your family against creditors and negative influences, while also serving as a safeguard to your children’s and grandchildren’s inheritances.