Like most people, your estate plan will likely begin with the execution of a Last Will and Testament. Your Will may serve as the foundation of your estate plan; however, as both your family and your estate grow you will probably need to incorporate additional estate planning tools and strategies into your plan in order to accommodate that growth. One of the most common additions to an estate plan is a trust, due in large part to the flexible nature of trusts and the numerous goals a trust can help you reach within your estate plan. Your estate planning attorney may have suggested creating a revocable trust to add to your estate plan. If you do not know much about trusts, your first question is “what is a revocable trust?”
Trust Basics – What Is a Trust?
First, you need to know what a trust is. A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. The beneficiaries of a trust may be individuals, entities, or even family pets. A trust may also have both current and future beneficiaries.
Testamentary vs. Living Trusts
All trusts are fist divided into two general categories – testamentary and inter vivos (living) trusts. A testamentary trust is a trust that does not actually take effect until your death. A testamentary trust is always a revocable trust because it does not take effect until your death. Just like your Will, it can be changed or revoked up to the time of your death. Living trusts, as the name implies, are trusts that do take effect during the lifetime of the Settlor of the trust. A living trust can be either revocable or irrevocable.
What Is a Revocable Trust?
When a trust is revocable, it simply means that the Settlor of the trust has the ability to modify, amend, terminate, or revoke the trust at any time and for any reason. When a trust is irrevocable the Settlor of the trust cannot modify, amend, terminate, or revoke the trust for any reason once the trust becomes active.
When Is a Revocable Trust the Right Choice?
Because of the personal nature of estate planning, you should always consult with your Missouri estate planning attorney when making decisions relating to your estate plan. There are, however, some common circumstances in which a revocable trust is the best choice for an estate plan. For example, if your goal is incapacity planning, a revocable living trust is the best choice.
When used as an incapacity planning tool, a revocable trust works by allowing you, as the Settlor, to create the terms and appoint the Trustee. In this case, you will appoint yourself as the Trustee. You then appoint the person you want to control your assets in the vent of your incapacity as the successor Trustee. The majority of your assets are transferred into the trust and you continue to control those assets because you are the Trustee of the trust. In the event that you become incapacitated, your successor Trustee, chosen by you, will step in and take over as the Trustee. This creates a seamless transition from you to your chosen successor without the need for court intervention and/or family squabbles.
A revocable trust can also be used to distribute your entire estate. One major advantage to using a revocable trust to distribute your estate instead of relying entirely on your Will is probate avoidance. Assets held in the trust will bypass the probate of your estate. That, in turn, will save your loved ones both time and money. It will also allow your decisions with regard to the distribution of your estate assets to remain private.
Finally, using a revocable trust to distribute assets allows you to make staggered distributions to beneficiaries instead of handing a beneficiary a lump sum that the beneficiary may not be prepared to handle.
Contact Us
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns regarding a revocable trust, contact the experienced Missouri estate planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.
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