Estate planning can be time-consuming and complex, but it is often well worth the effort. Developing a solid estate plan is crucial to protect yourself if you become incapacitated and your family after you pass away. While a will is the most common estate planning tool, other options may be more suitable depending on your circumstances. One such option is a revocable living trust.
A revocable living trust allows you to transfer your assets to the ownership of a trust during your lifetime. The owner of the trust, or “grantor,” retains control over the assets while still alive and can change or revoke the trust at any time. There are several significant differences between a trust and a will, so it’s important to understand the implications of each during the estate planning process.
Learning about the benefits and drawbacks of a revocable living trust is essential to making informed decisions about your estate plan. If you are ready to create a trust, seek assistance from TrustHandled
Advantages of the Revocable Living Trust
Whether a revocable living trust is right for you will come down to your situation, but there are some universal benefits that you can expect to see with this choice.
- More control. Revocable living trusts often come with greater control in managing your assets, both during your lifetime and after you pass away. With a will, you can specify your beneficiaries and the assets each will receive, but you have less control over how and when they will receive them. This includes conditions or restrictions on distribution.
- Greater flexibility. Revocable living trusts are flexible, changeable, and, as the name suggests, revocable. This means the trust can be modified or withdrawn anytime during the grantor’s lifetime. On the other hand, wills can only be changed by creating a new will or a codicil, which can be time-consuming and expensive.
- Avoiding probate. /’Wills go through probate, which is a court-supervised process of distributing assets. However, revocable living trusts can avoid this process because the assets in the trust are already owned by the trust and managed by the trustee. This can save time, money, and stress for everyone involved.
- Privacy. Wills become public records when they go through probate. Anyone can access and review the contents of a will. On the other hand, you can keep the property, assets, and terms of a revocable living trust private.
Disadvantages of the Revocable Living Trust
While revocable living trusts offer many advantages over wills, there are also some downsides. Today, wills are the more common estate planning tool for a few reasons. Below are some potential drawbacks to setting up a revocable living trust.
- More expensive. Setting up a revocable living trust can cost more than a will, as it requires transferring ownership of assets to the trust and ongoing maintenance. This can include fees for the initial setup, administrative fees, retitling fees, ongoing trustee fees, and legal fees associated with transferring assets into the trust.
- More complex. A revocable living trust can be more complex to create than a will. It requires the transfer of ownership assets to the trust and ongoing management of the trust by a trustee. This can be time-consuming and may require professional assistance.
- Funding requirements. To have an effective revocable living trust, it must be properly funded. This means that assets must be retitled in the name of the trust. If assets are not properly transferred, they may be subject to probate and defeat the trust’s purpose.
- Continuous maintenance. Maintaining trust books and records is necessary to manage a revocable living trust. This involves keeping accurate and up-to-date records of all transactions, deposits, withdrawals, and distributions.
Who Should Set Up a Trust?
Many choose to set up revocable living trusts for their estate plans. In particular, these types of trusts can be a popular option for individuals wanting more control over the management and distribution of their assets after death. But more importantly, understanding who should set up a trust comes down to a person’s goals and circumstances. While the list below is not exhaustive, those who may benefit most from a trust typically include:
- Those with substantial assets
- Those with complex family situations
- Those who want to avoid probate
- Those who value privacy
- Those looking to plan for incapacity
Ultimately, the decision to set up a trust should be made after carefully considering your situation and estate planning goals.
How to Establish a Revocable Living Trust
While setting up a trust can involve more work and ongoing management than creating a will, it provides more control and flexibility over an individual’s estate. If you seek a greater level of privacy, avoidance of probate, and other benefits of revocable living trusts, the steps to set one up are outlined below:
- Choose a trustee. First, decide on the person you would like to be your trustee. This individual will manage and distribute the trust assets according to your wishes, so select someone competent and trustworthy.
- Create a trust agreement. Draft an agreement that outlines the terms of the trust, such as the assets included, the beneficiaries, and the trustee’s powers and duties.
- Fund the trust. Transfer ownership of assets into the trust, such as real estate, bank accounts, investments, and personal property.
- Update beneficiary designations. Ensure that any beneficiary designations on retirement accounts, life insurance policies, and other assets are updated to reflect the trust as the primary beneficiary.
- Sign and notarize the trust agreement. Next, you will need to sign the trust agreement. Your state laws might require a public notary as a witness to make the trust legally binding.
- Maintain the trust. Keep accurate records of all transactions, including deposits, withdrawals, and distributions, and monitor the trust continuously to ensure its accuracy is maintained.
Use TrustHandled as a Platform to Generate Trust-Related Documents
If you’re beginning your estate plan and worry about expensive attorney’s fees and nerve-wracking in-office meetings, TrustHandled has your back. TrustHandled is an exciting new tool that makes estate planning easier. Using our platform, you can learn about the estate planning process, access all necessary documentation, and receive the step-by-step guidance you need. Our 100% online, easy-to-use platform can help you start creating your revocable living trust today. Take control of your estate plan by signing up with a TrustHandled account here.