The True Costs of Estate Planning - Part 3 "What is a Revocable Living Trust and what are the Benefits"
In Parts 1 and 2 of “The True Costs of Estate Planning” it was discussed that at a minimum, having a Will is priceless to protect your young or disabled children and although you can save money in probate by having a valid Will, you can potentially save thousands of dollars by also having a Revocable Living Trust.
So, even though there are many different types of trusts, we are going to focus on just the Revocable Living Trust and its benefits. Simply put, a Trust is two things:
*In a Revocable Living Trust, the initial grantor is usually the initial trustee thereby allowing full use, transfer, and access to all assets.
Once the trust is signed by the Grantor, the Grantor puts the assets into the trust, aka “funding the trust.” There are different rules for different accounts, but essentially, the assets are titled in or granted to a different name. For instance, prior to establishing my trust, my bank account was titled in my name, J. Denise Arnold. After I established my trust, it is now titled in the name of my trust, the J. Denise Arnold Family Trust, J. Denise Arnold, Trustee. I still have complete control over my bank account and can still deposit, withdraw and transfer all funds from my account the same as when it was in my name only. Also, I can name the trust as the beneficiary or contingent beneficiary of any accounts that have a beneficiary designation, such as life insurance or an IRA. (I highly recommend working with a financial advisor with this part!)
There are three main benefits of a Revocable Living Trust.
1. It avoids probate. As stated before, up to 5-6% of your estate can be spent in probate. A trust allows the gathering and distributing of assets without continual court appearances and court supervision which allows your heirs to receive their assets quicker and not as much money spent on court and attorney fees.
2. You, as the grantor, can choose when your children receive their inheritance if they are young when you pass away. With only a Will, children could receive large sums of money at 18 years old; however, a Trust allows you to choose varying ages, such as your children receive ½ of the trust principal at 25 years old and the other ½ at 30 years old.
3. It helps in the event of the disability of the grantor. If you become disabled, a successor trustee has immediate access to the trust assets. A trust can be written to require the successor trustee to use the trust assets for your care and comfort if you become disabled.
One added benefit of a trust is that it helps you to get your accounts and financial affairs in order when funding your trust. This is a huge blessing to your family when you are no longer with them. This isn’t all the information on a trust, but hopefully it helps you and your family make a decision on whether a trust is right for you. Dee Arnold – WillCounsel Attorney