Are You Planning Your Estate?
We build our wealth for a plethora of reasons. It can be to ensure a good education for yourself and, later down the line, your children. It can be to get that beautiful home you and your partner have always dreamed about. It can be for all of the things in between: the vacations, the medical scares, the amazing Christmas memories, and eventually, your passing.
If you are working through planning your estate, you have probably been bombarded with many options and opinions regarding you, your assets, and how they should be managed. Maybe you thought all trusts and wills were the same. You just list down your assets and decide who gets what after you pass. Now, you’re being hit with terms like revocable and irrevocable trust.
What should you do?
What is a Trust?
You have likely heard of a will. It’s the first thing you think of when you start planning your estate. But what is a trust?
A trust, also known as a trust fund or a trust account, is a legal arrangement to ensure your assets go to specific beneficiaries. You, the creator of the trust, puts assets into the trust account. You then appoint a trustee to administer those assets. While you are alive, you can appoint yourself the trustee and appoint a person to be the trustee successor, the person who will take over administering the assets of the trust after you pass.
A Trust has three main parties:
Grantor
The grantor is the person who creates the trust and then assigns assets to it. In this situation, you are the grantor.
Beneficiary
A beneficiary is a person who will receive some or all of the trust’s assets. You can name one beneficiary or many beneficiaries and divide your assets as desired.
Trustee
The trustee is the organization or person who administers the trust. You can appoint yourself as the trustee, meaning you have control of the trust for as long as you are alive and able.
What is a Revocable Trust?
A revocable trust, also known as a living trust, is created during the grantor’s lifetime. This means you can create a revocable trust. At the same time, you are alive, maintain control of that trust by naming yourself the trustee, then have a successor take over as trustee after you pass, or you are no longer able to administer the trust.
People may choose to create a revocable trust because they are planning for incapacitation. Perhaps you have been diagnosed with a terminal illness, and you know your time is limited. You can create a revocable trust so you can get your estate in order before you are no longer able to do so. This allows you to have control of your trust while you are able, but there is already a plan in motion when the day comes that you are no longer able to manage your assets.
You can also instate a revocable trust in order to avoid probate. Probate is the legal process in which your will is validated. Assets in revocable trusts can bypass probate. Assets that pass through probate become public records, meaning bypassing probate can help keep the contents of the trust private.
What Are the Pros and Cons of a Revocable Trust?
As you’ve likely gathered, there are quite a few benefits to a revocable trust. Here are a few of the pros of creating a revocable trust:
- You can appoint yourself the trustee, maintaining control over your trust and the assets within.
- You can transfer assets outside of probate, speeding up the process and maintaining privacy.
- Your successor trustee can manage your assets should you become incapacitated.
- You can modify and even cancel your trust at any time.
While creating a revocable trust may seem like the obvious choice, it is important to remember that there are a few cons related to creating a revocable trust:
The assets within a revocable trust are not protected from creditors.
Assets held within a trust are counted as resources when determining eligibility for benefits. This means you may not qualify for needs-based Medicaid coverage for a nursing home.
Your estate may have to pay estate taxes on assets held in a revocable trust.
Should You Establish a Revocable Trust?
Several key factors must be considered when determining whether or not to create a revocable trust when planning your estate.
Are you planning to use the assets within the trust? Do you want to be able to easily change the terms of the trust or even cancel it? Have you recently been diagnosed with a condition that may leave you incapacitated? Do you want an easy way to avoid probate, ensuring a speedy and private distribution of your assets should you pass?
Then you likely want a revocable trust!
Do You Need an Estate Lawyer When Planning a Revocable Trust?
Creating a revocable trust is a relatively easy, painless process. That doesn’t mean you should employ a professional estate attorney to make sure your trust is ironclad and being interpreted the way you intend.
Scheuerman Law, LCC doesn’t see you as just another paycheck. We want to make sure your assets are being managed correctly, that your trust takes care of you, and that your family has one less thing to worry about after you pass.
Call 443-888-2062 to schedule your free consultation with our team of compassionate lawyers. You can also complete our online contact form to schedule your consultation!
