Many people who are not wealthy assume that trusts are only useful for high net worth individuals. They are under the impression that last wills are for “the rest of us.”
This may be a mistaken assumption. All trusts are not created equal. Different trusts serve different purposes. Yes, there are trusts that are used to accomplish objectives that are needed primarily for the wealthy. On the other hand, there are other types of trusts that would not only be useful to high net worth individuals, but to the “mere mortal,” as well.
One of these trusts is the revocable living trust.
The Value of a Revocable Living Trust
With a revocable living trust you as the person creating the trust will be referred to as the trustor. You name a trustee to administer the trust. You also name a beneficiary or beneficiaries who will receive distributions out of the trust.
At first you as the trustor can act as both the trustee and the beneficiary. Under this arrangement you do not surrender control of the assets while you are living. Further, because the trust is revocable, you can actually dissolve it at any time. You can also amend the terms and add or subtract beneficiaries as you see fit.
In the trust agreement you name a successor trustee who will assume this role after your death or incapacity. This is the individual or entity that will administer the trust in accordance with your wishes.
You can ask someone you know to act as trustee. However, there are other options. First of all, you may not have a personal relationship with anyone who has experience in asset management.
Secondly, even if you did know someone who is qualified, if he or she passes away or becomes incapacitated, you should have an alternate to replace them.
As an alternative you could name a trust company or the trust department of a bank to act as trustee.
When you convey assets into a living trust, your beneficiaries will receive their inheritances outside of the process of probate. When you use a will the estate must be probated before inheritances are distributed.
Probate can take a significant amount of time. There are also expenses incurred during probate. Probate costs will decrease the amount of the inheritances that will be received by the heirs.
With a living trust probate is not a factor. The trustee distributes assets to the beneficiaries in a fast and efficient manner.
Another benefit is the fact that you can include the selection of a disability trustee. If you were to become incapacitated and unable to handle your financial affairs, this disability trustee would administer the trust on your behalf, because you are still the primary beneficiary.
- Living Trusts Streamline the Estate Administration Process - June 8, 2020
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