As you grow older, one of the things that you should consider is how you’re going to plan your estate. For most people, estate planning is important because it allows you to set up a strategy that can be used to pass on your assets later in life. Fortunately, there are several estate planning strategies that you can take advantage of now and these include the establishment of revocable trusts.
If you’re new to this concept, this article will show you what revocable trusts are, how they work, and how they can benefit you and your family.
What Is A Revocable Trust?
In simple terms, a revocable trust refers to a written legal document that outlines how your assets, such as real estate properties, bank accounts, investments, and other valuable possessions, will be administered and disposed of after your death. It has provisions that can be altered depending on the wishes of the grantor. In other words, the revocable trust remains private and becomes irrevocable upon the death of the grantor.
In addition, under a revocable trust, the income earned by the properties covered by this document is given to the grantor and will only be transferred to the beneficiaries of the trust after death of the grantor. It’s also important to remember that the value of the properties held by the trust can change because of the investments’ appreciation or depreciation, or the trustee’s expenses incurred during the lifetime of the trust.
Lastly, when it comes to revocable trusts, another important thing to remember is that they can be established by two grantors. For example, if you have a spouse and you decide to establish the trust together, it’ll be called a joint revocable trust. And, if you want to learn more about this trust, such as when it becomes irrevocable, you can check out some resource websites for more information.
How Can Revocable Trusts Benefit You?
Now that you know what revocable trusts are, it’s time to familiarize yourself with how these trusts can benefit you and your family as you get older. Therefore, if you consider using a revocable trust for your assets, below are the benefits you can gain from the get-go:
1. Flexible And Can Be Changed
As mentioned, establishing a revocable trust means you can amend the provisions of the document at your own discretion. This ability can be very useful especially if your life circumstances have changed or in the event you’re uncertain who you want to designate as your beneficiaries.
And, since this type of trust is flexible, it can be a great option for people who want to prepare their estate planning strategy at a young age. Thus, if you want to ensure your family’s future, establish a revocable trust as early as you can.
2. Doesn’t Require Probate
Typically, if you have a will when you pass away, your estate will undergo a probate proceeding. This refers to a proceeding wherein your assets are distributed according to your express wishes. However, you must know that probate can be a relatively slow procedure that take a couple of months.
For example, if you have assets in different states, your heirs and beneficiaries may have to undergo different probate proceedings. To avoid this lengthy and time-consuming process, setting up a revocable trust can be an excellent idea. Unlike a will, this type of trust avoids probate since your trustee can pass your estate on to your beneficiaries without having to wait for a court order. In such a case, this can be more affordable and quicker process of settling your estate after your death.
3. Allows You To Continually Manage Your Assets During Disability
Apart from death, having a revocable trust is also beneficial in the event you become physically or mentally incapacitated to administer all your assets. This means that even during your disability, you can make sure that all your properties remain available for your own benefit. This can be done by designating a trustee who can take over and manage your personal affairs on your behalf.
Moreover, in doing this, you don’t need to undergo a court proceeding to appoint conservators. In such a case, you can make sure that the person who’ll take care of your properties has the fiduciary capacity to act in your best interest.
4. Offers Privacy
Upon your death, wills and other related transactions will enter into public record. This means that all provisions included in the will, including the name of your beneficiaries and what they’re inheriting can be seen by anyone who wants to see it.
However, all the properties covered by a revocable trust are administered and distributed with privacy. In short, the public can’t see the records of where your assets are transferred. Thus, if you’re a private person who wants to make your affairs confidential, you can make use of a revocable trust to make that happen.
5. Less Costly And Less Hassle
Generally, creating a revocable trust requires more funds and effort because it’s a more complicated document than a regular will. However, this type of trust is actually less costly and less of a headache because it prevents you from going through an expensive probate proceeding.
6. Assets Under A Revocable Trusts Are Protected By FDIC
Under the law, the Federal Deposit Insurance Corporation (FDIC) safeguards money deposited into a bank account amounting to USD$250,000. Luckily, this coverage amount can increase if it’s under a revocable trust. This means that the maximum insured amount can go up to USD$1,250,000, which is USD$250,000 for you and each of your four beneficiaries.
Indeed, there are many advantages to putting revocable trusts into practice. From saving money on property taxes, to controlling the funds invested in your trust and their distribution, to not needing any court or other formalities, you’ll get a chance to get the best possible deal on your assets. However, if there’s one thing that you need to keep in mind is to make sure that the trust that you’re putting into effect is beneficial for you, and that it’ll not create any problems in the future.