There are many important steps to take when planning your future, including estate planning. Most people know that it is important to draft a will and a health care directive, but many will overlook other useful estate planning tools, such as trusts. There is a misconception that only wealthy people should make a trust, but this is far from the truth. Estates of all sizes can benefit from creating a trust. A revocable trust is one type that deserves careful consideration.
A revocable trust is one that is created during the lifetime of the person funding the trust. For this reason, it is sometimes called a revocable living trust. Like all trusts, a revocable trust is created by the grantor transferring property to a trustee, who then will hold that property for the benefit of the named beneficiaries. The property in the trust will be distributed according to the grantor’s wishes. In most cases, the grantor advises the trustee to pay income from the trust to the grantor during his or her lifetime, and then to distribute the assets to named beneficiaries following the grantor’s death. A grantor can name as many beneficiaries as he or she chooses, including not only friends and family, but also charitable institutions, churches, schools, or any other entity the grantor chooses. As is suggested by the name, a revocable trust can be changed by the grantor at any time. The grantor can transfer property out of the trust, change the structure and how it will be administered, and change beneficiaries.
A revocable trust can have many benefits for the grantor. A revocable trust means that the assets inside the trust do not have to go through the probate process. This helps the beneficiaries avoid any potential litigation that may surround other issues of the estate. Moreover, the trust helps maintain privacy, as a will is public record, but trust documents, in general, are not. Potential grantors should carefully review the tax consequences of a revocable trust. Placing assets into a revocable trust does not shelter those assets from state or federal income taxes. Typically the tax consequences of the property are the same to the grantor whether or not the assets are placed into the trust.
There are many options for estate planning, and you should talk to an experienced attorney to help walk you through your options. Call us today at (320) 299-4249 for an appointment and we can talk about the different options that would work best for you and your family.