What is a Revocable Trust?
What is a Revocable Living Trust?
A Revocable Trust, also referred to as a Living Revocable Trust or sometimes Living Trust, is a form of estate planning tool that has widespread applicability. The trust document creates a revocable trust entity that can be used for and accomplishes several different aspects of estate planning and private wealth transfer.
Most notably, a Trust will allow you to avoid the probate court process. Think of the Trust entity as a vehicle. The vehicle is loaded with your assets, property and business interest. You assign a trust personal friend or family member to drive this vehicle around the probate process and directly to its destination, your beneficiaries.
Second, the Trust allows you to place constraints on how and when the inheritance can be used by your beneficiaries. For example, you could stipulate that until the age of 25 or 30 your children only have access to their Trust’s funds for Health, Education and Maintenance (HEMs). Upon reaching those age limits they would then have greater discretionary control over their funds but hopefully should be a more financially responsible age.
Third, your gift through a trust provides asset protection to your children’s inheritance. Once you and your spouse pass away, the trust becomes irrevocable. A gift from an irrevocable trust provides creditor protection to their inheritance from lawsuits, credit liabilities and even a future divorce. It is possible to gift in such a way that you could protect your child from divorce.
Lastly, as a collection point for all of your assets, determining which assets are probate assets ad which are non-probate becomes pointless. You can effectively include all forms of assets in a single place, making administration easy and straightforward.