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If you want to get your financial matters organized and protect the future of your loved ones, you might be considering a revocable living trust.
This article answers some of the common questions about these documents. A Texas estate planning attorney can answer more of your questions and help you decide if a revocable living trust is the right option for you.
What is a Revocable Living Trust?
A revocable living trust is a legal document that, similar to a will, stipulates what will happen to your money and other assets when you die. You can serve as the trustee of the trust during your lifetime and choose the person who will be the successor trustee when your life ends. We always recommend that you name at least one backup trustee in case the person you selected is unable or unwilling to serve.
You will need to retitle the assets that will pass through the trust because the trust cannot distribute assets it does not own. For example, you would retitle your house, car, and other assets from your name with Bob Smith as the owner to “The Revocable Living Trust of Bob Smith” with the trust owning the item. If, at any time, you want to add another asset to the trust or take an asset out of the living trust, you can do so.
What Are the Benefits of a Revocable Living Trust?
Unlike a will, a revocable living trust can be useful during your lifetime. You can be the initial beneficiary of your trust and name an individual or a company to manage your assets while you focus on your bucket list items. Another option with a living trust is that you can make arrangements for your care if you were to become incapacitated by an injury or illness.
Typically, trust documents do not get filed with the court or go through probate, so you and your heirs will have much more privacy than you would have with a will. This lack of oversight, however, means that you will want to be confident in the ethical conduct of the person you select as the trustee.
As the name suggests, a revocable living trust can get changed, canceled, or revoked at any time by you, as long as you still have legal capacity. As long as you have the mental status needed to write a new trust or will, you can amend your existing living trust or rip it up, as you see fit.
What Are the Disadvantages of a Revocable Living Trust?
A revocable living trust does not provide some of the tax advantages of an irrevocable living trust. The trade-off, according to the Internal Revenue Service (IRS), of getting to make changes to an irrevocable living trust is not getting all the tax protection found in an irrevocable one.
You may not qualify for needs-based Medicaid coverage for a nursing home because the assets held in trust are still counted as resources when determining benefits eligibility.
Another drawback is that these papers are usually more expensive to get written than most wills. However, a lengthy, complicated will could cost about the same as a simple living trust. Many people find the wealth of options a trust can provide to be well worth the expense. A Texas estate planning attorney can draft the estate planning papers you need. For legal help contact our office today, we offer a free consultation.