Although a Last Will and Testament remains the most common estate planning document, a trust is not far behind in popularity. If you decide to add a trust to your estate plan, you will have to decide which type of trust to create. An Overland Park trust attorney at Parman & Easterday explains some of the many advantages to revocable trusts.
A trust is a relationship whereby property is held by one party for the benefit of another. A Settlor (also referred to as a “Grantor” or “Trustor”) transfers assets into the trust that is then administered by a Trustee, appointed by the Settlor. Trusts can be divided into two broad categories – testamentary and living trusts. A testamentary trust is a trust that only activates after the death of the Settlor and is always revocable up to the time it activates. As the name implies, a living trust activates while the Settlor is still alive. Living trusts can be revocable or irrevocable.
Advantages of Revocable Living Trusts
The purpose of the trust and the goals you hope to achieve will dictate what type of trust you create. For example, among the many advantages of a revocable living trust are:
- Modification – as the Settlor of a revocable living trust, you can modify the trust at any time and for any reason. This makes it easy to transfer assets into and out of the trust as well as add or delete beneficiaries of the trust. You can also change the trust terms or replace the Trustee as often as you wish.
- Termination/Revocation – just as you can easily modify a revocable living trust, you can also revoke or terminate the trust at any time and without the need for a reason.
- Probate avoidance – probate is used to identify and value the assets of the decedent as well as provide creditors of the estate with an opportunity to file claims against the estate. If you use a Last Will and Testament to distribute your estate, the Will must be probated. That means the beneficiaries of the Will must wait until the conclusion of the probate process before receiving their intended gifts – a process that can take months to get through. The advantage to using a trust to distribute estate assets is that trust assets bypass the probate process altogether, allowing them to be distributed much faster.
- Incapacity planning – if you become incapacitated, someone must take over the control and management of your assets during your period of incapacity. One of the many advantages to creating a revocable living trust is that it works as an incapacity planning tool by first allowing you to name yourself as the Trustee. Then name the person you wish to take over control of the trust assets in the event of your incapacity as your successor Trustee. You then transfer major assets into the trust and manage them as you always have. If you become incapacitated, however, control shifts seamlessly to your designated successor Trustee without the need for court interference.
- Protecting the inheritance of minor children – a minor child cannot inherit directly from your estate. As the Settlor of a revocable trust, you appoint the Trustee, allowing you to decide who will protect and manage the inheritance you leave your children. In addition, a trust lets you stagger the inheritance you leave your children instead of giving them a lump sum and lets you decide when they receive those distributions.
Contact an Overland Park Trust Attorney
For additional information, please join us for an upcoming FREE seminar. If you have questions or concerns about the advantages of revocable trusts, contact an experienced Overland Park trust attorney at Parman & Easterday by calling 405-843-6100 or 913-385-9400 to schedule your appointment today.
Parents of young children often create a testamentary trust as a safety mechanism in case something happens to them while their children are young. The trust is only activated in the event of their death.
Yes. Because you are not legally married, your partner would receive nothing from your estate – no matter how long you have been together. A revocable trust ensures that your partner will inherit from your estate and allows you to appoint him/her as the Trustee of the trust.
One of the primary advantages to an irrevocable trust is asset protection. Once assets are properly transferred into an irrevocable trust they become the property of the trust and are, therefore, out of the reach of creditors.