Do You Need a Revocable Living Trust?
Many times when I meet with younger clients, they don't want to discuss estate planning. They think that they only need to be concerned about it once they have accumulated sizable net worth. There is a preconceived notion that estate planning is only for wealthy individuals, and this is just not true. Everyone needs to have an estate plan in order to protect their loved ones after they die, and many clients ask if they need to create a will or a living trust. It does not do any good to have a great financial plan and then to not plan for what happens to your assets once you pass away.
Clients will ask if they need to create a revocable living trust, or if a will will suffice. A revocable living trust can be a great option because of the benefits it provides. A revocable trust is essentially a replacement for your will. Instead of directing assets toward the court system for probate administration, your assets are directed to a private entity, which is your trust. A revocable trust can be amended at any time.
The advantages to using a revocable trust include skipping the probate process. Probate is the administrative court proceeding where the payment of your debts and distribution of your assets is supervised, usually by a judge. Probate can be time consuming, expensive and is public. Placing assets in a revocable trust will allow your assets to be distributed in the manner you specify in the document and will do so free from court supervision. Another great benefit a revocable trust provides is protection from going to court to control your finances if you become mentally or physically incapable of taking care of yourself and your finances. If you create a revocable trust with your partner, for example, he or she has the authority over all of the trust property, so they do not have to go to court to gain access to it. Some other benefits include privacy and that the revocable trust allows money to be available immediately upon death. The trustee can use the money to pay for estate taxes, administrative fees or debts.
Some things to consider before creating a revocable trust include the fact that assets that will be held in the trust need to be retitled. It can be time consuming, but this is the way to make sure that your assets are included in the trust. Also, there are no tax benefits for creating a revocable trust. You continue to pay taxes on the assets in the revocable trust.
The best way to determine whether a revocable trust is right for you is to consult an estate planning attorney about your situation. They can help you to set up the estate properly to protect your assets.
If you are thinking about getting your financial life back on track this year, please contact me to set up a call.
About the Author
Patti Hughes is a Chicago Fee-Only Financial Planner. Lake Life Wealth Advisory Group provides comprehensive and objective financial planning, retirement planning, and investment management to help clients organize, grow and protect their assets through life’s transitions. She is a fiduciary, and does not sell products or earn commissions, so she truly acts in the best interests of her client