Revocable Living Trust: Trusting Your Future

If a disaster strikes, will your children be provided for? One of the best ways to ensure their future is for you to establish a revocable living trust (RLT). It will distribute your assets quicker and be less costly for your loved ones during their time of grief.

An RLT is a legal document that establishes a separate entity (the trust) and states who will receive the assets, what assets they will receive and how the assets will be handled. As the grantor, you will set up and fund the trust, and as beneficiaries, your children will be able to benefit from the trust when you pass away. Any of these things can be changed or the RLT can be dissolved during your lifetime.

One benefit of an RLT is that it will expedite the transfer of your assets to your beneficiaries by avoiding probate, a legal process that occurs to settle an estate in accordance with the person's will or as required by law. Probate can be very costly and take months to complete. In the meantime, your children may need to pay fees for various court proceedings upfront before your assets can be distributed to them. A trust also allows your assets to remain private upon your death. Without a trust, your assets will become documented in court records and become public information.

Another important reason for having a trust is to efficiently utilize the tax laws. When a person dies, federal and state estate taxes are imposed. These taxes can add up to 51 percent of the total estate value and must be paid by the beneficiaries before they can receive the assets. This can be cumbersome if beneficiaries are underage or if they do not possess huge amounts of liquid assets.

For couples that have a large estate, an RLT can separate the assets acquired before and during their marriage. This can be very helpful for today's blended families. For instance, parents can designate assets owned before remarrying to children from a previous marriage. They can also designate assets acquired as a couple to children they had together. This may assist in the fair distribution of assets and help to avoid estate challenges, which are more common when only a will is present.

You may also want to consider a clause that authorizes a third party to manage the trust should you be temporarily or permanently incapacitated due to an accident, injury or age. This person (or entity) will have control over all assets in the trust and will make decisions in the best interest of the beneficiaries. You should also appoint a successor trustee in the event that something happens to the primary trustee. If a trustee is not specified, a court may become involved and appoint a guardian.

By using a professional trustee to manage your assets, your RLT can benefit several generations. You can set specific parameters regarding the withdrawal of assets or even specify that withdrawals be limited to income only so that your assets can continue to grow.

Through a revocable living trust, you can plan ahead for the benefit of your loved ones. It can give you peace of mind to know that they will have the means to prosper even after you pass away. Estate planning documents require sound legal advice from an attorney who specializes in the field. Consult an expert to set up your RLT today.