People who are not extraordinarily wealthy sometimes overlook trust creation, because they think trusts are only useful for high net worth families. In fact, this is not the case with a revocable living trust.
There are multiple different benefits that you derive when you use a revocable living trust as a vehicle of asset transfer. Probate avoidance is one of them.
If you are in direct personal possession of your property, and you arrange for its transfer through the terms of a will, the heirs that are named in the document would not receive their inheritances immediately after your passing. The executor or personal representative would be required to admit the will to probate.
This is a legal process, and it can take close to a year, even if there are no complications. The time consumption is one potential difficulty, but there are others.
If you were to convey assets into a revocable living trust, the trustee that you name in the trust declaration would be empowered to distribute assets to the beneficiaries in accordance with your wishes after you die. These distributions would not be subject to the probate process. As a result, you could arrange for assets to get into the hands of your loved ones in a timely manner.
Another good thing about a revocable living trust is the fact that you can state your wishes regarding the way that you want the assets to be distributed. For example, you may be uncomfortable allowing for lump sum distributions. If you feel this way, you could instruct the trustee to distribute income on a monthly basis to the beneficiaries.
Termination of a Living Trust
You as the grantor of the trust can decide when the living trust will terminate. The trust is revocable, so you can actually dissolve the trust while you are still living and walk away with the assets in your personal possession if you want to do so.
An event could trigger the termination of the trust. For example, it would be possible to terminate a trust when the beneficiary reaches his or her 21st birthday, or you could use some other age threshold.
If you wanted the beneficiaries to receive lump sum distributions comprised of everything in the trust, it would end when the trustee was able to complete the trust administration tasks.
These are a few examples, but the main thing to recognize is the fact that you as the grantor of the trust control its termination.
We have prepared a free special report on revocable living trusts. If you would like to learn more about them, visit this page to download your copy: Indianapolis IN Living Trusts.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.