Too often, the terms "Trust" or "Trust fund babies" conjure up images of the Rockefellers or Vanderbilts living extravagantly off their family wealth for generations.
In reality, there are numerous kinds of Trusts, and one need not have buildings named after them to enjoy the benefits and protections of a trust document. In short — you do not need to be wealthy to have a trust.
If you fall into one of the following categories, you should consider sitting down with an Estate Planning or elder law attorney to draw up a Trust:
If any of these scenarios apply to you, then you should consider speaking with an estate planning attorney about setting up a trust.
A trust can help protect your assets and ensure that they are distributed as you intended.
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Revocable Living Trusts
For most individuals and couples, particularly those who fall into the first six categories above, a Revocable Living Trust is often the preferred option.
A Revocable Living Trust is a trust which you create during your lifetime. The fact that the trust is revocable means that it may be changed or terminated at your wish as long as you continue to be competent at that time.
One of the major benefits of having a Revocable Living Trust is allowing you to avoid probate. Also, it will allow a chosen agent to seamlessly manage your assets if you become incapacitated. You will still need a Will to serve as a back-up in case you fail to re-title assets in the trust’s name during your lifetime.
During your lifetime you will retain control of all the income and principal in your Revocable Living Trust. Upon your death, the Trust will pass down the assets however you have specified in the document, and it will do so outside of probate court.
The use of a Revocable Living Trust allows for property to be managed uninterrupted by incapacity. Through proper planning and funding of a Revocable Living Trust, if you were to become incompetent, your Successor Trustee will be able to step in and manage all your financial affairs for any items that are in the trust.
- Another major benefit of the Revocable Living Trust is that it avoids probate. Please note that by doing a Revocable Living Trust, you will not avoid all costs, as you will still have to pay legal fees for the drafting of the trust, and may have to pay fees for administering the trust. However, this is often less expensive than the probate process.
- Plus, the use of the trust will allow you to avoid much of the time delays and aggravations which are associated with the probate procedures.
- Further if you have property in other states than where you reside, it will also allow you to avoid probate in those states. Finally, some people like that a Revocable Living Trust provides privacy versus the probate process.
- One of the disadvantages of the Revocable Living Trust is that most of the expenses which you incur are done so immediately. The expenses are not deferred until your death, as is the case in probate.
- Trusts are more expensive to draft than wills.
- Trusts require a good deal of initial legwork because you have to change many ownership and beneficiary forms so that your trust is fully funded.
- Finally, if you utilize a bank or professional Trustee, there will be fees charged for managing the trust. Please note, however, these fees are often waived and not taken if the trustee is a family member who is going to be an ultimate beneficiary of the trust.
- If the trust generates any significant income after your death, an annual trust income tax return will have to be filed.
Frequently Asked Questions
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