Estate planning is often a complex endeavor that involves a wide range of inter-related tools and strategies. While each estate plan is unique, there are some tools commonly found in an estate plan. A revocable living trust is one of those tools. You should always discuss the specifics of your estate planning needs and goals with your estate planning attorney before deciding what tools and strategies are right for you; however, it also helps to familiarize yourself with some of them ahead of time. Toward that end, an Indianapolis living trust attorney from Frank & Kraft explains what a revocable living trust is and why you might incorporate one into your estate plan.
What Is a Revocable Trust?
A trust is a fiduciary legal arrangement that allows a third party, referred to as a Trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. All trusts can be broadly divided into two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s (trust creator) Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Because they are activated by the Settlor’s Will, which can always be revoked, a testamentary trust is always revocable. Conversely, a living trust activates during the Settlor’s lifetime. Living trusts can be further sub-divided into revocable and irrevocable living trusts. If the trust is a revocable living trust, as the name implies, the Settlor may modify or terminate the trust at any time. An irrevocable living trust, however, cannot be modified or revoked by the Settlor at any time nor for any reason unless a court grants the right to revoke or modify the trust.
Common Uses for a Revocable Trust
Because trusts are so flexible, there are an endless number of reasons why you might want to incorporate a revocable trust into your estate plan; however, some common reasons include:
- Avoiding probate – probate is the legal process that is usually required before estate assets can be distributed to beneficiaries and/or heirs. Probate can be a time consuming and expensive process which is why people often include probate avoidance as one of their estate planning goals. One way to significantly decrease your estate’s exposure to the probate process is to use a revocable living trust because assets held in a trust bypass the probate process altogether.
- Incapacity planning – if you suffer a period of incapacity at any point in time, someone will have to take over control of your assets and finances. A revocable living trust serves as an excellent incapacity planning tool by allowing you to appoint yourself as the Trustee and appoint the person you want to take over control of your estate as your Successor Trustee. Assets are transferred into the trust and you continue to manage them as long as you are able; however, if you become incapacitated, the Successor Trustee seamlessly takes over control of the trust assets.
- Protecting the inheritance of a minor child – a minor child cannot inherit directly from a parent’s estate. To resolve this dilemma, many parents choose to create a testamentary trust. Using a testamentary trust makes sense because the trust won’t be needed unless the parent dies. If it is needed, the Trustee manages the trust assets which are used to provide for the child until the child reaches adulthood, at which time he/she is entitled to the remaining trust assets.
- Retaining control over assets – whether you are concerned about a spendthrift beneficiary, you wish to encourage a beneficiary to use assets in a specific way, or you just like the idea of maintaining control over your assets even after you are gone, a revocable living trust allows you to do just that. Because you create the terms of the trust, and can modify them whenever you wish, you retain a considerable amount of control over how your assets are used.
Contact an Indianapolis Living Trust Attorney
For more information, please join us for one of our FREE seminars. If you have specific questions about how a revocable living trust can help you, contact an experienced Indianapolis living trust attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.