One should always have legal documents that distribute their assets at the time of their death. Sure, it’s not something that is fun to think or talk about, but it’s important to make sure that you have all your financial assets set to be properly dealt with after your death for the benefit of your family and any other beneficiaries.
Today, many people are opting for revocable trusts instead of wills when it comes to taking care of their finances and estate. So, what are the benefits of these types of trusts, and when should you consider a revocable trust instead of a will?
What is a Revocable Trust?
Also referred to as a living trust, a revocable trust is a way to manage your assets during your lifetime and at death. With this type of trust, you are both the creator and the beneficiary (during your lifetime) and are also often the initial trustee (Trust Point Inc, as a professional corporate fiduciary, will also act as an initial trustee). As with a traditional will, you provide for the disposition of your assets at your death, either outright to your beneficiaries or in the trust for their benefit.
The Benefits of a Revocable Trust
Perhaps the most important reason why revocable trusts are becoming increasingly popular is that they are not prone to probates following the death of the beneficiary, unlike a will. A probate is a grace period in which the will must be officially approved before the assets can be distributed to those named in the will. Because revocable trusts bypass the probate phase, you can save time and money because a probate period can be long and costly.
Another advantage of a revocable trust is that you can prepare your estate in the event you become ill or experience health concerns to be taken over by a “successor trustee,” who then takes over the role of handling your affairs. You can specify how it should be determined that you are not mentally competent enough to still be in control, whether it be by a physician or a team of physicians who must all concur.
If the beneficiary at the time of your death is not of the legal age to hold property, a revocable trust will also hold onto the assets until they are of legal age (as opposed to having the court appoint a guardian).
Why You May Still Need a Will
While there are pros to going with a revocable trust, many people still end up creating what is called a “pour-over” wills to deal property that has been omitted from the initial trust. This because mistakes can happen and as time goes on, you may forget to transfer newly acquired assets to your trusts. A pour-over accounts for these discrepancies by catching any missed assets and putting them into a will. This will is then subject to being probated, but it is nonetheless a good safety net if you decide to go with a revocable trust.
Upfront Costs for Living Trusts Save You Time and Money in the Long Run
While wills will force your beneficiaries to wait after the probate period to receive your assets and there are associated legal costs to finalize an estate in probate, a living trust will generally cost more in time and money to set up and fund than writing a will. As previously mentioned, even after you create your revocable living trust, you have to keep documents updated and deed to transfer new assets into the trust. Though, in the long run, it is likely you will save time and money for both you and your family with the trust, especially if you at some point in your life you become incompetent to handle your finances and the trust on your own.
It should also be noted that revocable trusts do not protect your assets from your creditors. This is because a revocable living trust can be terminated at any time. Because of this, the trust creator maintains ownership of his asset and a creditor could make the owner of a living trust terminate the trust and surrender the assets.
Go With What’s Best for You
There are a lot of variables that will go into figuring out which option to choose. In the end, you’ll have to decide what is best for you and your financial situation. However, you don’t have to make the decision on your own. Make sure you work with a lawyer or a trust and investment services company and they’ll help you figure out which option is the ideal one for you. We also have additional resources, like our video “Which Trust is Best for You?,” so you can learn more about the various types of trusts.
Trust Point is Here To Help
Whether you’re creating a will or a living trust, we’re ready to work with you. At Trust Point, we’re committed to making things simple, easy, and stress-free for our clients. Throughout the entire process, our team of experts are there to offer expert guidance, so you can rest assured knowing your finances are in safe hands and under control. Click here to get started.
