Understanding The Benefits Of A Revocable Living Trust
Of the instruments available to avoid probate, the revocable living trust is perhaps the best and most flexible option available. You may wonder what about a trust makes it special? The answer is very simple. A normal will substitute is a single account, and doesn’t have the flexibility of a trust.
A single account like a life insurance policy or a 401k is like a box; it can only contain the assets within its interior walls. A trust is more like an umbrella that can extend to cover all of the boxes you can possibly collect. A trust can cover all of the life insurance policies, brokerage accounts, real estate, or any other property you own, and can protect it under one umbrella. In fact, this umbrella actually functions like a legal storage unit for all the property you hope to later benefit someone else.
For instance, if you have a 401k, you can place it in the trust. You can do the same with a life insurance policy, the annuity you’ve been building since 1985, the deed to your house on Miami Beach, the title to your beloved Harley Fatboy, your first swiss army knife, or anything you can imagine leaving to someone else.
In order to have a trust, there has to be a transferring of property, which is to be held for the benefit of another, usually called a beneficiary. Don’t be confused about the word property. It does not solely mean real property. It can mean anything of value that can be given to someone else. The person in charge of the property is called a trustee, and has what is called a fiduciary duty to manage the property in the best interests of the future beneficiary, even when the interests of the beneficiary conflict with those of the trustee.
There are two main types of trusts. One is called a testamentary trust, which means that it is a trust that is created by the terms of a person’s last will and testament. I.e.: In the will of John Doe, it states that upon death, John’s assets should be placed into a trust and used for the benefit of his wife Jane Doe.
The other main type of trust is the focus of this article and is called an inter vivos trust or living trust. Simply put, a living trust is a trust created during the lifetime of the person creating it, and it is the most flexible option for people who want to have control over their assets while they are alive, but still have those assets work for the benefit of others once they die. Typically, the person who was the owner of the property before the trust was created, usually called the settlor transfers it to the trust, and then becomes the trustee until they become incapacitated, voluntarily name another trustee, or they die. A revocable living trust is just like it sounds, and to can be revoked at any time at the will of the settlor.
Is a Trust Right for Me?
The great thing about a living trust is that the assets can be used and grown as the settlor sees fit during their lifetime, and while they are acting as trustee. If new property is acquired during the lifetime, it can be added to the trust. If property becomes less valuable or needs to be sold in order to care for an illness in the family, this can all be done while the settlor is still alive. The living trust provides the most flexibility for the settlor to use the assets during their life, and still leave them for the benefit of their intended recipients.
If you have assets that you’d like to be saved or grown and used to benefit someone else, it’s possible that a trust would be the best instrument for you to use to accomplish whatever you goals are for the property. As in all circumstances, the best option is to enlist the help of an experienced estate planning attorney who can help you make the arrangements. Contact the estate planning attorneys at Temmerman, Cilley, and Kohlmann at (925) 233-4399 or (408) 290-7210.