What is a revocable living trust and do you need one?

Like many Minnesota residents, you probably know that you need a will. Otherwise, the state gets to decide where your assets go after you pass away. However, a will is not the only estate-planning document you can use to provide for your family after your death.

Have you considered a revocable living trust? This and other types of trusts are not only for the rich and famous. Depending on your family circumstances, a living trust could provide the best way for you to provide for your family after your death.

What is a revocable living trust?

You establish a revocable living trust during your lifetime. Because it is “revocable,” you can make changes, add or subtract assets and even cancel it while you are alive. This trust basically has four parts:

  • The person who creates the trust is the grantor.
  • The person who benefits from the trust is the beneficiary.
  • The trustee is the person who administers the trust.
  • The trust assets are the assets of the trust.

You may serve as the grantor, beneficiary and trustee of a revocable living trust during your lifetime. Once you pass away, the successor trustee and successor beneficiary or beneficiaries take over. In addition, the trust cannot be changed after your death.

What does a revocable living trust do for me?

Numerous advantages come with this type of trust. They include the following:

  • Since assets do not go through probate, you receive more privacy.
  • The assets in the trust avoid the probate process.
  • You can disinherit anyone who challenges your wishes after death.
  • You can keep assets separate from marital estate.
  • You can control spending of minor children’s guardian.
  • You can control spending of beneficiaries.
  • You can minimize estate tax.
  • You can provide for generations of descendants.

Of course, another advantage is the fact that you can make changes to the trust during your lifetime as previously stated.

There has to be a downside. What is it?

Even though the above advantages may be enticing, you should consider the following disadvantages:

  • You must re-title your property into the trust.
  • You must adhere to record keeping requirements.
  • You must pay administrative expenses if your trustee is a trust company or bank.
  • Retaining ownership of property does not provide you much asset protection.

Failing to account for as many potential issues as possible could also cause unnecessary hassles in administering your trust both during your life and after your death.

So how do I get the most out of a revocable living trust?

One way to help ensure that you receive the most benefit from this trust is to consult with an estate-planning attorney. Their familiarity with these trusts can provide you with the guidance and answers you need. Furthermore, an attorney can help you create a full estate plan that meets your goals and expresses your wishes in a way that provides you with peace of mind, and your family with a set of instructions they can use to relieve some of the stress associated with estate administration while they grieve for your loss.