People often wonder whether to create a will or to establish a trust when they are planning what will happen to their estate. Despite the fact that the decision may seem strictly financial in nature, it's also deeply personal. There may be strong reasons to lean one way or the other, so it's definitely worth considering all of your options. Here are some things to know about creating a living revocable trust.
First, let's define that complicated term.
- "Living" simply means that the trust operates while you are still alive. If you become incapable of handling your affairs, the person named in the trust or "trustee" can make the financial decisions needed to maintain your care, pay all bills and so forth. The trustee has limited, specific powers designed to protect you and your money.
- "Revocable" means that you can revoke the trust if your situation changes, or if you wish to revise it for another reason. It's flexible, as opposed to an "irrevocable" trust, which can't be canceled without the approval of the person named to inherit the assets within it. If you put all of your assets into an irrevocable trust, they are no longer technically yours.
So, what are some of the advantages of having a living revocable trust?
1. Because it's established while you're still alive, you can make changes. If you completely change your mind about even having the trust, you can dissolve it.
2. Upon your death, your estate will not have to go through the process of probate. This means you will maintain privacy about your (and your beneficiaries') finances.
3. You have more control in that you can leave assets to be distributed right away, or state that you want them to be broken into smaller amounts and shared over a certain period of time (a/k/a "trust fund").
4. The trust can also serve as a power of attorney, if you have it written that way.
5. Your family (including the trustees or beneficiaries) knows your plans well in advance and there's no last-minute scrambling to find a will or determine whether it's valid. Peace of mind can be very valuable at a time when people are suffering a personal loss.
Still, this doesn't mean that your situation will be best served by a living revocable trust. It may be too complicated or too expensive for your needs. To discuss the pros and cons of each approach, talk to an attorney about estate planning and find out what makes sense for you.