Understanding the Revocable Living Trust
The word trust is a wonderful word in the English language because it gives a name to the foundation of human relationships. We know about the trust between two people, that is hard to establish and too easy to break. We may also know the word trust from the term trust fund babies, which conjures images of young people with extravagant lifestyles, whose parents have given them a lot of money (and little sense). The term revocable living trust takes a little bit from both of these definitions to create a very important estate planning tool.
What is a revocable living trust?
A revocable living trust is a legal entity that holds your most valuable property during your life and leaves detailed instructions for its managed distribution after your death. It is an alternative to a will-based estate plan.
Like a trust fund, a revocable living trust is a means of passing money and other assets from one person to another. It also incorporates the trust of personal relationships because you designate someone you trust to handle the distribution of your assets on your behalf. This person is called a trustee, and he or she can be given a lot of discretion about how and when to give away your property, according to your instructions.
During your lifetime, you are the grantor of the trust, and you decide what property to put into the trust. You are also the trustee and can take property out of the trust at any time. Because the trust is revocable, you also terminate it at any time.
Should I make a revocable living trust?
One of the biggest benefits of creating a revocable living trust is that it allows your property to pass seamlessly to your heirs and beneficiaries. Without a revocable living trust, your family will have to endure the probate court process, which is time-consuming, costly and totally public. In California, they would likely have to wait 12-16 months to receive their inheritance and lose 5% of the value of the estate to court fees. If you own your home or have assets totaling over $150,000, the only way to avoid probate is to make a revocable living trust.
A revocable living trust can also be a wiser way to give assets to minor children or other immature beneficiaries. If some of your heirs could use some spending oversight, the trustee you name in your revocable living trust can decide how and when to distribute your assets, instead of giving outright gifts of large sums of money. The revocable living trust can also protect your beneficiaries’ inheritance from future creditor claims, lawsuits, or divorce proceedings by keeping the property out of their names.
How much does a revocable living trust cost?
LifeLadder’s Trust Plan is a comprehensive estate planning package that ranges between $3500-$5500. While online forms may have tempting price points, they are not sufficient to handle the complexities of family relationships or to protect a lifetime of wealth-building.
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