If you’re unfamiliar with this helpful estate-planning tool, you might initially question why you’d let a third-party have control of your most prized assets. There can actually be tremendous benefits to involving another entity.
Maybe you’ve had a health scare. Maybe you’ve gone through a life-altering event. Maybe you have a pension that you’d like passed over to your loved ones when the time is right.
From avoiding the obstacle of probate and the associated fees, to preserving your legacy worry-free, there are several reasons why it might be right for you and your family.
First, let’s discuss what it actually is.
What is a Revocable Living Trust?
A revocable living trust allows you to put a plan in place for your assets in case you become disabled or incapacitated. With this flexible trust option, you can make changes any time you want.
Trusts help administer financial assistance to beneficiaries (like children or those with mental disabilities) who may not be capable of managing his or her finances properly. This beneficiary will be granted permission of the trust once this person can properly manage his or her own finances.
Revocable Living Trust vs Irrevocable Trust
A revocable trust can be changed by the trustor at any point in his or her lifetime.
An irrevocable trust isn’t allowed to be changed at any point.
While it might sound intimidating to establish a trust that can’t be edited, it too has some benefits. With an unchangeable trust, it can result in minimal estate taxes.
Is a Revocable Living Trust Right For Me?
There are several situations where a trust can be quite beneficial.
If you’ve remarried – Sometimes a remarriage can throw a wrench in finances. A Revocable Living trust will help you and your new spouse properly disburse your wealth and execute sound financial decision-making.
If you’re a company executive or a small business owner – A Revocable Living Trust is a great tool for extending the family wealth cycle into the fourth and fifth generations. In many cases, this is also a helpful tax tool for business owners.
If you’re the parent of a special needs child – If you don’t feel that your child is capable of monitoring and spending their inheritance properly, you might consider allowing a third-party to dispense this child’s wealth in accordance with an organized payout schedule.
If you have underage children – If your children are too young to appropriately handle the large sum of money that you feel is rightfully theirs, allowing your estate to become part of the trust is a great way to make sure that they get what they need at the exact right time.
If you’ve won the lottery – Lottery winners make up a unique group of individuals. Usually, because the large sum of money they receive is sudden and life-changing, they are somewhat less financially literate than other wealthy individuals. While not every lottery winner should open a trust, they should at least seek financial guidance.
If you have a family member in hospice or with an age-related mental illness – If you have a loved one who has unfortunately been diagnosed with a life-altering illness like Alzheimer’s that might influence their spending habits, or if they are currently undergoing hospice, you might consider opening a trust as a “just in case” measure.
If you want clarity on exactly where all your asset will go – If you’re concerned at all that your assets might be passed along inappropriately, a trust is a great way to gain clarity on exactly what, when, and to whom something will be passed on. Unfortunately, we’re a forgetful species, so documentation is absolutely crucial when trying to remember exactly what we were thinking when we were of sound mind. Your local financial entity can work with a lawyer to make absolutely sure you make the right decision, and more importantly, that you stick to it.
How Does the Involvement of a Third-Party Help Ease Financial Stress?
Letting a third party control your assets with your revocable living trust helps ease the burden of doing it yourself.
Hurt Feelings are Avoided
Unfortunately, some of us have family and relationship problems. When these arise, sometimes it’s helpful to have another entity to lean on for support.
You Can Be Confident That Correct Decisions are Made After You Pass
Writing down the “who gets what and when” will give you the peace of mind you need as you pass on. When you’re confused about the “who,” the “what,” or the “when,” it’s usually a sign that you could use a strong, steady hand to hold. This is when it makes sense to involve a third-party.
When family member manipulation occurs, it can result in the wrong asset being passed down to the wrong hands. An outside entity can help you make these important decisions without bringing emotion into play.
Is a Revocable Trust Better Than a Will?
A revocable living trust isn’t necessarily “better” than a will. However, it does establish more parameters.
For example: Let’s say that you have a 12-year-old daughter. You’d like to leave her 30% of the profits made from your business when you pass. Then, unfortunately, you pass away earlier than expected. It wouldn’t make sense to leave her that wealth when she’s 12. If you leave this large percentage of your wealth in a trust, you can specify that she’ll receive it when she’s 25 instead of the day that you pass. In this specific situation, it would make sense to establish a revocable living trust.
Revocable Living Trusts and Your Business
There are certain situations where it makes sense to add your business and its assets to your trust. Typically, as the business is passed from generation to generation, owner interest and passion diminishes. While this isn’t the case in some scenarios, it’s wise to consider including your company and its assets to avoid potential financial obstacles.
While it may not seem like it right now, your business is a family asset. You’ll eventually want to figure out a way to maximize your earnings and success without having to call the shots yourself.
Without your Limited Liability Corporation (LLC) or business designation in your trust, it could potentially be piecemealed to board members or sold to a stranger. In some cases, it might not survive at all.
If you ever have concerns with your business partner, it would be great to know that your company won’t be handed over to him or her, right?
What Happens if I Change My Name?
Nothing is affected when you change your name. Regardless of why you change your name (marriage, religion, etc), you’ll simply need to provide documentation of your new last name. There are no serious issues that will result from your name change.
Are Assets in a Revocable Trust Protected From Creditors?
They’re technically owned by the trust creator. So creditors could potentially force the termination of the trust and make the owner give up the associated assets.
Can I Change My Revocable Living Trust?
Absolutely. The entity responsible for creating the trust will work with an attorney who will write and modify the trust document. This isn’t a difficult process, as the whole point of making a living trust “revocable” is so that you can change it as necessary.
How Field & Main Can Help:
By utilizing our industry knowledge and extensive fiduciary service experience, we can help put an organized plan in place for your assets.
We can bring you some peace of mind by:
- Protecting and managing assets for you and your beneficiaries
- Collecting income
- Making deposits directly into other accounts as you designate
- Keeping clear records of all transactions
- Providing easy-to-understand statements
- Compiling information for tax returns
Still Need More Information?
Find out everything else there is to know about Revocable Living Trusts (stipulations, where to start, and much more) or if you want to talk right now, we’ll be more than happy to lend an ear.
Investments are not insured by the FDIC or any federal government agency, provide no bank guarantee, are not a deposit and may lose value.