A revocable trust is a legal document that allows the grantor (the person who creates the trust) to take your personal assets and transfer them to trust ownership over your lifetime. A revocable living trust is a popular estate planning tool that you can use to determine who will receive your property when you die. Most living trusts are revocable because you can change them as your circumstances or wishes change. Revocable Living Trusts Are Alive Because You Create Them During Your Lifetime.
Lawyers sometimes call this inter vivos. Another important difference between revocable and irrevocable trusts comes with taxes. The assets of a revocable trust remain yours and you will pay the corresponding taxes. This includes any income tax, inheritance tax or estate tax.
In fact, your revocable trust will have the same Social Security number as you. The effect is that any income from the trust assets will go to its own income statement. In irrevocable trusts, the assets are no longer yours. They belong to the trust and all taxes are applied to the trust.
You can include a statement in the trust stating that it cannot be modified or revoked. This makes it an irrevocable living trust. However, the law allows even irrevocable trusts to be modified or revoked in certain circumstances. A trust can be revocable, which means I can revoke it.
It also means that I can change it. So if I don't like the way I'm doing in life, I'll just change it. That is one of the beauties of this revocable trust. Other trusts are irrevocable, and there are some definite estate planning needs for an irrevocable trust, but we won't talk about that today.
Now my trust can also be established while I am alive and that is why it is called a living trust. Another type of trust is called a testamentary trust, that is the one that was established in my will and again we will save the testamentary trust for another day. The grantor of a living revocable trust retains the power to freely modify and revoke the trust, as well as to reacquire its assets. It is distinguished from an irrevocable trust that cannot be modified or revoked by the grantor.
In addition, assets transferred to the revocable living trust are not protected for the purposes of Medicaid eligibility and long-term care planning. You should also be aware that revocable trusts do not offer the same type of protection that irrevocable trusts offer creditors. Contrary to popular belief, revocable living trusts offer very little asset protection if you retain an ownership interest, such as appointing yourself as a trustee. A living trust can be used to help control a guardian's spending habits for the benefit of their minor children.
So, let's look at this concept of a revocable living trust and find out if it's exact representations and find out if you really need it. With a revocable living trust, you do most of the work upfront, making the disposition of your estate easier and faster. As if I had a vacation home here, they realize how hypothetical all this is, and then I have my other house there, and my third home somewhere else, that's a good use of the revocable trust, because again my son doesn't have to go to every state and legalize my will, but my son just uses the trust to transfer the ownership. As I said in my previous article, anyone with property in more than one state should seriously consider transferring their property to a living trust to avoid having to have more than one estate.
With an irrevocable living trust, you cannot modify or terminate the trust without the approval of all persons named in. Having the necessary retirement savings and a financial plan will allow you to live the kind of life you want to live during your golden years. In conclusion, it is advisable that you consult with an attorney before executing a revocable living trust in order to fully understand the advantages and disadvantages of its use. In addition, living trusts avoid the probate process, reduce the possibility of a court dispute, and maintain the privacy of your documents.
Living trusts also tend to be better maintained if someone challenges a provision, which could save more time and money. Health Care CoverageEstate Planning Living Trusts %26 WillsSpecial Education Act Estate Management %26 Guardianship of Adult Probate %26 Legal Guardianship of Disabled Adults Special Needs Planning. The living revocable trust is distinguished from a testamentary trust that is part of a Last Will and Testament, and only comes into effect after the death of the testator (the drafter of the will). .