$59 trillion in wealth will be transferred from 94 million estates by 2061. Only 26.8% of adults 18-34 and 22.5% of those 35-34 have documents planning how this transfer will play out.
Estate planning services help create them. They may or may not be able to hold all of your assets, from your home to RAI in real estate.
Read on to learn what a revocable living trust is and how it can help with estate planning.
Estate Planning Defined
“What is estate planning” is a common question. 74% of Americans are confused by the process and what it entails.
47% think it’s only for the rich, but 77% realize it’s for everyone because everyone has an estate. It’s a catch-all term that includes everything you own, including homes, cars, and accounts.
Estate planning is the process of managing what happens to these assets after you die. It involves deciding what to do if you ever become disabled or incapacitated and who gets what. This is done but creating documents that define your wishes.
Estate planning services make this difficult process easier. They offer a team of professionals such as an estate planning attorney.
Receiving their help is not an event that happens in a single day. The plan needs to adapt to any changes and be reviewed regularly.
Not all of those who undertake the process understand this. Only 20% of Americans who have a plan have updated it in the last five years.
What is a Living Trust?
A trust fund is an estate planning tool where you can place your assets into them to be distributed later. Revocable means that it can be changed, while irrevocable means that it cannot without consent from all involved.
A living trust is made during your lifetime. It’s valid as long as you create it while you are mentally capable. It details what your wishes are for all the assets contained within.
You create it and are referred to as either the settlor, grantor, or trustor. You appoint a trustee to carry out your wishes, and you can also add co-trustees. The beneficiaries are the ones who’ll receive which of the assets.
You’ll also need to put the assets you want into it first. This is known as “funding” and must be done before you die.
Assets You Can’t Include: RAL In Real Estate and More
An estate planning attorney can advise you on what assets are eligible to go into a revocable living trust. This may differ depending on the laws n your area. A few examples of what may not apply include:
- Retirement assets
- Health saving accounts
- Foreign assets
- Vehicles
- Cash
There are also limits on what you can use the assets in the trust for. Consider RAL for real estate provisions. You may think a trust could keep a grantor or their spouse in their current living situation, but this isn’t always possible.
An irrevocable trust cannot be used to pay for assisted living. Any distribution made to the facility voids the terms of the trust.
A revocable trust can provide for this situation. The grantor retains all ownership over their assets and can use them however they want, as long as they are mentally capable. If not, the trustee could use the money to pay for their assisted living.
Pros and Cons of a Revocable Living Trust
If you hire financial planning services and ask them “what is a living trust,” they should do more than outline how they work. They should give you a clear explanation of the pros and cons and whether or not they’re the right document for you.
Pros
The primary reason for creating a revocable living trust is to avoid probate. You’ll save time and money and maintain privacy by keeping your assets out of court.
The fact that they’re revocable also makes them more flexible. They’re an easily changed way to plan for the unpredictable future.
Having reliable trustees ensures that the assets are managed properly after death or if you become incapacitated. You won’t even have to go through the complex process of giving them power of attorney over you.
Cons
Creating trusts is one of the more complex and expensive estate planning services available. You’ll have to hire attorneys, re-title property, and go through other time-consuming and expensive processes.
A revocable trust doesn’t provide much of the same asset protection as irrevocable trusts. Creditors can still go after them or use them in a lawsuit.
There are minimal tax advantages compared to wills. Extra taxes may pop up.
In certain cases, a revocable living trust may not even protect you from probate. If avoiding the courts is your only goal for creating it, you may be disappointed.
How to Establish a Revocable Living Trust
The first step to setting up a living trust is to identify all of your assets. What do you have, and what do you want to put in the trust?
The next is to identify the other parties. Designate a trustee and outline who the beneficiaries are and what they’ll receive.
Hire estate planning services when creating the document itself. They’ll help you outline fair terms and make sure it meets all legal requirements.
Funding the trust involves more than deciding which assets you want to place into it. You may have to change property titles or designate the trust as a beneficiary for an account. You maintain control of them and can earn income on them until your death but will have to pay any taxes they accrue.
Finding Estate Planning Services
Estate planning is a difficult process that becomes easier the sooner you begin. Choosing the right documents is the most difficult part.
A revocable trust is comprehensive yet flexible. You place assets such as your home or car in the trust to fund it. Certain types such as an RAL in real estate may be ineligible.
You maintain access to them but designate a trustee to manage them after your death or if you become incapacitated. You also designate beneficiaries to receive them.
Get a free consultation for our estate planning services today.
