Many wills today are still handwritten notes rather than formal documents.
After spending decades working so hard, we all want to make sure what we leave behind in an estate goes where we want it go. Frequently, this involves bequeathing property to children, relatives or friends. A revocable trust agreement provides some comfort in this area where a normal will cannot.
Living Trust Definition
A living trust, or revocable trust, establishes legal authority over the distribution of specified assets while the original owner is still alive. The revocable aspect of the trust allows the owner to change the trust or to cancel it while he is still alive. Once the owner dies, then the trust automatically become irrevocable, and the assets transfer to the beneficiaries named in the legal document.
Revocable Versus Irrevocable Trust
The revocable trust is so named because it stays in place legally until the owner dies or changes it. Because it is revocable, the owner can cancel the trust at will without any timing restriction. Additional terms and asset details can also be added, modified or removed through trust amendments. The irrevocable trust, once finalized, is a done deal, even if the owner is alive. No changes can be made legally after the fact by the owner or anyone else except a court.
Benefits of Revocable Trusts
The problem with a standard will tends to be how it gets processed when executed. Wills are required to go through probate, no exception. Further, they can be challenged and up-ended by court litigation. Because trusts actually transfer the title of assets prior to death, the disposition of the property never gets to the court for confirmation. Once the owner dies, the trust already has control of the property and then transfers it to the beneficiaries. Since the trust represents evidence of the owner's intentional plan and sound thinking, courts rarely overturn trusts on challenge. This provides protection from challenges that a normal will cannot.
RevocableTrusts Can Replace Wills
If desired, a revocable trust can technically replace a will altogether. However, one needs to keep in mind that a trust requires frequent updating and documentation tracking. If not, any assets not included and/or created after the creation of the trust will be outside of it. With no will, the disposition of the excluded property then ends up being decided by the probate court.
FDIC Protection
Trust accounts retain federal protection on a monetary basis by Federal Deposit Insurance Corporation (FDIC) laws up to $250,000 per account. However, specific requirements need to be met. First, the account needs to be clearly identified as a trust. Next, all beneficiaries need to be named on the bank records. Finally, the beneficiary needs to be alive or a viable organization, such as a charity or non-profit recognized by the Internal Revenue Service.
Considerations
Revocable trusts can provide strong estate planning protections, but these legal shelters don't work for everyone. To provide a catch-all, wills are still recommended, even if a revocable trust is in place. This guarantees the disposition of any assets not included in the trust. Finally, a trust is not a boilerplate document; everyone needs to craft the trust that works best for their particular situation. Using someone else's template can result in serious mistakes without understanding probate law.
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