Estate planning and revocable living trusts. Between summer vacations, outdoor activities and backyard barbeques, it may not be top of mind. However, with the Fourth of July behind us, now is a good time to address this issue before the back-t0-school rush. Today I am beginning a series of posts entitled Estate Planning 101. The first topic is revocable living trusts.
Revocable Living Trust Defined
A revocable living trust is a legal arrangement whereby a person (the trustor) transfers property to another (the trustee) who manages it for beneficiaries. Because the trustor can amend or terminate the arrangement, it is called revocable.
How Do You Create It?
The trustor creates a revocable living trust by signing a legal document and transferring their property to the trustee. The process of transferring one’s assets to the revocable living trust, which estate planning attorneys call “trust funding”, is a vital step. Absent funding, the estate plan will be ineffective. For most people, funding entails signing new signature cards for bank accounts, completing beneficiary designation forms for IRAs, 401(k)s and life insurance policies and recording deeds for real property including the primary residence.
The Advantages of Revocable Living Trusts in Estate Planning
First and foremost, revocable living trusts avoid probate – a huge benefit. Probate is expensive and time-consuming. Probate also results in the loss of privacy and makes legal challenges to your estate more likely.
In addition to probate avoidance, revocable living trusts are advantageous for asset protection. What is asset protection? This means ensuring that your beneficiaries’ inheritances do not inadvertently end up in the hands of other parties such as creditors, ex-spouses or the government. Click here for more on asset protection in revocable living trusts.
Lastly, revocable living trusts can minimize or eliminate estate taxes.
Revocable living trusts are an excellent estate planning tool. Some balk at the cost. While more expensive than a basic will, they offer several advantages. A knowledgeable Norman, Oklahoma estate planning attorney can assess your circumstances and help determine if a revocable living trust is right for you.