A cornerstone of a complete estate plan is a revocable living trust. It allows you to avoid probate and have control over what happens to your money when you pass. In this article, we will discuss revocable living trust basics. This includes how they work, their advantages, and how to create one.
How a Living Trust Works
A revocable living trust is an entity that holds assets for the benefit of others. When you create a trust, you are known as a trustor. You will set out the provisions of the trust and how assets are to be distributed. You also have the responsibility of transferring your assets into the trust. During your life you will be the initial trustee this means that you will retain the power to make changes to your trust provisions, remove assets from the trust, and title new assets into the trust. Once you pass away you will have a successor trustee. This is the person you name to take control of the trust after you. They will manage the trust’s assets and distribute assets to your beneficiaries according to the instructions that you left behind.
Advantages of a Revocable Living Trust
Now that you understand the basics of how a living trust works, it is important to understand the advantages of creating one. These advantages include:
- Avoidance of Probate: Since a trust is a separate entity, it can avoid the lengthy, complicated, and expensive probate process. However, all assets must be property titled into the name of the trust. Anything that is not property titles could be subject to probate.
- Revocability: A revocable living trust is an ambulatory document. During your life, you will be able to make changes to your document or even completely revoke it.
- Control: With a living trust you have substantial control regarding the distribution of assets to your beneficiaries. You also have almost endless options regarding the distribution. This includes everything from large outright gifts of assets to life estates in a property.
- Privacy Protection: Since trusts avoid probate, they keep your private information out of the courts and public records. This allows you to keep your affairs private.
- Eliminate Challenges: If you are worried about someone causing trouble when you pass, a living trust can help with this as well. With a trust, you can disinherit anyone who tries to contest your trust.
Establishing a Trust
The first step in establishing a trust is to compile all the necessary information. This includes who you want as your successor trustee, your beneficiaries, and your distribution provisions. Once you have that figured out you will need to set up an appointment with an estate planning professional In Arizona, this can be an attorney or a certified legal document preparer. Which one you choose will depend on your situation and personal preferences. If you require legal advice and have a complex situation, an attorney would best suit your needs. Whereas if you know what you want and only require general facts, a certified legal document preparer may fit your needs.
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