A Revocable Living Trust is a legal agreement that outlines how you want your assets to be allocated upon your passing. It is also known as a "inter vivos" trust since it was established while you were still alive and able to amend it at any point while you are still alive.
Many different kinds of families can benefit from revocable living trusts. Some individuals use them to start a new family estate, while others prefer to divide their assets among their children or adult children in separate estates. Others utilize them when a kid experiences an emergency financial need but isn't yet old enough to be placed under a conservatorship. (Take the unexpected withdrawal from school of an 18-year-old student.
What Is the Process?
Your estate is organized through the Revocable Living Trust, but no assets are actually transferred to it. Instead, you create a different legal instrument known as a "pour-over will" to transfer assets into the Revocable Living Trust after your passing and, maybe, after you become incompetent. A trustee who manages the trust's assets, investments, and money will be named by the pour-over. This trustee can be a friend, relative, or trusted individual, and they can be replaced if required. (Some individuals want to include a replacement trustee who will step in if the original trustee is unable to perform the duties.)
Your property is held independently of your spouse's through a revocable living trust. If you pass away before your spouse, their creditors are barred from seizing your assets. It also implies that your assets will remain yours for others to handle if you are incapable of managing them at the time of your death and require assistance.
Families benefit greatly from revocable living trusts because parents may leave assets to their kids without worrying that the money would end up in their kids' creditors' hands. They can choose when and if to make changes to their trusts and wills, but they are not required to do so right before passing away.
A Revocable Living Trust is more flexible and changeable than a will because it allows you to divide your assets anyway you see fit without having to make a final choice. Most Americans—roughly half—don't have wills in place, which means that if they pass away or become disabled without warning, they can lose everything or be forced to pay off someone else's obligations.
People who wish to reduce their tax obligations might consider revocable living trusts. You give assets to your beneficiaries through a will, and then you give them the cash (the executor executes the will). You control how to leave your assets in a Revocable Living Trust without actually transferring them.
Revocable living trusts aren't permitted in certain states because they don't believe they're flexible enough or have adequate safeguards against fraud or abuse; if that's the case in your state, you can utilize a Lasting Power of Attorney instead.
If you wish to leave money and property to your children, you need be careful about the sort of Revocable Living Trust you employ. A comprehensive asset protection trust is frequently used, which implies it was created for those who have a lot of assets and wish to avoid estate taxes.