By Barry Zimmer on January 15th, 2019 in Estate Planning
It can sometimes be difficult for people to understand why a particular course of action is better than another. This being stated, when clients in Cincinnati ask us questions about revocable living trusts, they have no problem seeing how this estate planning tool is much more effective than a last will. In this post, we will look at a handful of benefits that you gain when you use a revocable living trust as the centerpiece of your estate plan.
Consolidation of Assets
Without question, the execution of legally binding documents is at the core of the estate planning process at the outset. However, you have to consider the things that will happen after you pass away as well. If you maintain direct personal possession of your assets, and they are not consolidated in any way, the executor’s job is going to be quite challenging.
Things are entirely different when you establish a revocable living trust. You can quite intentionally convey everything that you intend to leave to your loved ones into the trust. After you are gone, the trustee would not have to try to track down assets that are scattered about as it were.
To account for resources that you may have never conveyed into the trust for one reason or another, you can include a pour over will in your estate plan. This device would allow the trust to absorb assets that you never conveyed into it.
Measured Distributions
When you use a last will to state your final wishes, the people that are named in it receive lump sum inheritances. They become the direct owners of their bequests. This can be a problem if you have concerns about the money management capabilities of someone on your inheritance list.
Plus, even if a person is not necessarily an irresponsible spendthrift, they may simply be too young or too inexperienced with financial matters to make wise decisions with large amounts of money. A revocable living trust can be the ideal solution under these circumstances.
If you establish a revocable living trust, you would name a trustee to administer the vehicle after you are gone. It can be someone that you know personally, but many people will utilize the trust department of a bank or a trust company.
Let’s assume that there are income producing assets in the trust. You could instruct the trustee to calculate the annual earnings and divide that figure by 12. The beneficiary could receive monthly distributions of the earnings only, and the principal would remain intact to produce an ongoing source of income.
To expand this hypothetical example, we will assume that the beneficiary was 35 years old when you passed away. You could instruct the trustee to distribute half of the principal when the beneficiary is 50 years old, and the other half when the beneficiary reaches the age of 65.
Total Flexibility
Some people are well aware of the existence of trusts, but they do not even consider creating one. They do not know if they will need assets that they would ideally like to pass along to their loved ones, so they do not want to surrender control of the resources prematurely.
This is certainly understandable, but these concerns are irrelevant if you use a revocable living trust. The first qualifying word says it all: if you ever want to revoke the trust, you can do just that and take back direct personal possession of property that you signed over to it.
Of course, you created the trust for a reason, so you will probably never want to dissolve it. We discussed the choice of a trustee previously, but that would be a successor trustee. When you are living, you can act as the trustee and the beneficiary, so you have control in every way.
The flexibility does not stop there. If you want to add or subtract a beneficiary, change the terms, or change the choice of trustee, you can do so at any time.
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