A revocable living trust is a legal document created to own property, such as a home or investments during the lifetime of a grantor. As a grantor, full control of the trust and the power to make changes to the trust terms is a responsibility. The name of this type of trust comes from its purpose to function while the grantor is alive. Revocable living trusts are used to accomplish different things, like ensuring that property is properly managed if for some reason a grantor is incapacitated, and also to maintain privacy.
How it Works
First, someone creates and funds the trust. As the trustee, they have the power to name a successor trustee or co-trustee as well as beneficiaries who will receive any assets remaining in the trust at the grantor’s death. The grantor manages the trust throughout the course of his or her life, and in the event that they become incapacitated, the successor trustee or co-trustee can immediately take over. If the grantor dies, assets remaining in the trust pass directly to the beneficiaries.
Do I need one?
A revocable living trust can be beneficial for those who have concerns about their health or ability to manage their finances. Additionally, those who want someone else to manage and invest assets may also be interested.
Pros & Cons
One advantage of a living trust is it avoids guardianship. If the grantor should become unable to manage the trust for any reason, the co-trustee or successor trustee can take over and continue managing assets right away. Additionally, a living trust avoids probate. Upon the death of the grantor, assets in the trust automatically transfer to the named beneficiaries, making it unnecessary to have a will.
On the other hand, one disadvantage of having a living trust is that it does not save taxes. Although it is a separate entity, it is not considered a separate taxpayer during the grantor’s lifetime and cannot be used as a way to minimize taxes. Another disadvantage includes that it does not shelter assets from creditors.
To learn if a Living Trust is a good fit for you, email Mike or call him at 314-822-0344.