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What is a Revocable Trust?

Estate Planners | Monday, March 21st, 2011

If you have concerns about how the beneficiaries of your estate will manage their inheritance when you have passed away, a revocable trust may be the best option for you. There is often at least one heir in the family who has trouble managing their money, and leaving that individual with a large sum could end up with disastrous results. You can maintain some control of your estate by establishing a revocable trust. A revocable trust is also known as a revocable living trust, and it can be substituted for a last will and testament in some instances. The revocable living trust will allow for the distribution of your assets upon your death in a quicker and less expensive method as compared to a will, as a will must pass through probate court.

What is a Revocable Trust?

The revocable living trust is a type of trust that allows for the transfer of your property and assets into a trust throughout your life. There are four important parts (or as it may be, people) in a revocable trust, including you (the grantor), a person who will distribute and manage the trust as required by the trust instrument (the trustee), the people who will receive benefits from the trust (the beneficiaries), and of course, the trust assets that you transfer into the trust.

As compared to a will, which only comes into effect when you have passed away, a living revocable trust can go into effect during your lifetime. The trust is revocable, meaning that you can make changes to the trust as you see fit. This type of trust is established via a written declaration or agreement that appoints a trustee to administer and manage the assets in the trust. Any competent adult can establish this type of trust. Basically, the trust governs how your assets will be handled once you have passed away. As the trust’s creator or grantor, you can name anyone that you choose as the trustee, including a trust company or a bank, if that is your wish.

Advantages of the Living Revocable Trust

The most obvious advantage of the revocable trust is that it is just that – revocable. You can make changes and amendments to the trust instrument while you are still living, at your discretion. There are several other notable advantages of the living revocable trust that are worth mentioning, including:

* Revocable trusts do not have to go through probate, which makes it simpler, cheaper, and faster for your property to be transferred after you have passed away. This can be particularly helpful when your assets include real estate that is located in several states.

* Revocable trusts preserve privacy. This type of trust allows for personal assets that are being transferred to remain private within the given constraints of the trust instrument. This is particularly appealing when you wish to avoid having your assets exposed during the probate process.

* Revocable trusts eliminate challenges to your estate. A will can often create a situation where one family member disputes the will at your death, which is a long, drawn-out process that can often leave huge rifts within the family. This type of trust can be written in language that prohibits a challenge to the desires you have for your estate; in fact, some grantors choose to posthumously disinherit anyone who challenges their last wishes.

To determine if the revocable trust is a good choice for you, consult an estate planner in your area.

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