You have several choices for estate planning. A revocable trust is an estate planning vehicle that is similar to a last will and testament, but has many important differences.
A trust comes into effect while you are still alive under a written document. Property and assets are transferred to the trust, to be held and administered by a trustee for the benefit of another. Typically, you would be the initial trustee of the trust, and would administer the trust for your primary benefit. After death, the trust could be administered for the benefit of a surviving spouse or children or could be liquidated and distributed. This type of trust has several benefits.
First, a trust provides for the orderly management of assets. During your lifetime, you will typically be the sole trustee and can manage the assets as you see fit. You can sell and acquire assets, change investments and fully utilize your resources. Trusts allow for the transfer of ownership of assets without relinquishing your control and enjoyment of the funds.
Second, a revocable trust allows you to make private provisions with respect to the disposition of your assets. Your wishes will not become part of public record, as they would if your estate went through court-supervised probate.
Third, if done correctly and completely funded, a revocable trust will avoid probate. It allows for the smooth transition of the ownership of assets. If the trust is to terminate on death and be distributed to beneficiaries, the settling of a trust should take less than three months. If one of your goals is to avoid probate, placing all of your assets in the trust is crucial.
Finally, a living trust is a good vehicle for planning for potential incapacity. By specifying a procedure for determining incapacity and then naming a successor trustee, you can ensure the seamless administration of your affairs.
However, revocable trusts have some disadvantages. Initial costs will be higher because trust documents are more complex to draft than wills. Transferring assets to trusts incurs transactions costs. Plus, trusts have ongoing record-keeping and maintenance. Using a revocable trust has no particular tax advantages; a revocable living trust still faces taxes and settlement costs if they apply to your estate.
Have a conversation with your attorney about which estate planning vehicle is right for you. Remember that there is no “one-size-fits all” answer to your financial and family needs.
Information provided by Madina L. Nguyen, attorney for Abendroth and Russell Law Firm, 2560 73rd St., Urbandale, 278-0623, www.ARPCLaw.com.