A Revocable Living Trust is an estate planning tool that provides tremendous benefits for individuals and families. Unlike a Will, which only takes effect after death, a Revocable Living Trust is effective during your lifetime. These Trusts are increasingly popular in modern estate planning.
Contrary to popular opinion, revocable living trusts not just for people with large estates. The benefits of this estate planning vehicle are available to people of ordinary means, too.
In this article, we will discuss five benefits that Revocable Living Trusts offer. And these benefits are available to almost everyone, regardless of wealth level.
1. Revocable Living Trusts Offer Flexible Asset Management and Distribution
A Revocable Living Trust allows you to manage your assets during your lifetime and afterward. You can serve as the trustee of the trust and manage the assets as you see fit.
A Trust can hold many types of property. A Trust can hold a variety of asset, like real estate, vehicles, bank accounts, tangible personal property, insurance policies, and business interests.
The Trust Agreement can lay out a number of ways to manage the property it holds. For example, during your lifetime you likely will want the ability to use trust assets whenever you wish. But for your Beneficiaries, you may want to gradually give portions of their inheritance over time, or upon achieving certain life milestones.
2. Trusts Bypass Probate and Keep Your Estate Private
One of the primary benefits of a Revocable Living Trust is probate avoidance. Probate is a court-supervised process of transferring assets after a person’s death. Probate can be time-consuming and costly.
Court fees, attorney fees, and executor fees can add up quickly. Especially if there are significant hurdles to deal with in handling your final affairs.
By transferring assets to a Revocable Living Trust, the assets are not subject to probate, saving your Beneficiaries time and money.
Additionally, it is much harder to contest the validity of a Trust than it is for a Will. Trusts are administered privately and are generally not subject to court supervision. This means you can pass your assets on and minimize the risk of unnecessary public family drama, if that is a concern of yours.
3. A Revocable Living Trust Can Have Incapacity Plans
Revocable Living Trusts are also capable of planning for incapacity. If you become incapacitated or are otherwise unable to competently manage your affairs, the Successor Trustee can take over management of the Trust assets without court intervention.
Sometimes in life, tragedies happen that leave us unable to take care of our affairs permanently. If that is the case, a conservatorship would normally be necessary to manage our responsibilities.
With a Trust, a conservatorship may be unnecessary (at least for your financial matters held under the Trust). There can be a fairly smooth transition to having a Successor Trustee manage assets. And this can be done without the publicity and expense of conservatorship proceedings.
This can provide a seamless transition of asset management, and assurance that your financial affairs are still in order.
As a side note, a Revocable Living Trust does not substitute for a Living Will or a Healthcare Power of Attorney. It is very important to convey your end-of-life care wishes to your family and healthcare providers. You can read more about Living Wills here.
4. Business Owners Can Avoid Hardships in Transition
If you own a small business in Tennessee, a Revocable Living Trust can provide a smooth transition of management and ownership in the event of death or incapacity.
You can transfer ownership of the business interest to the Trust, and the Successor Trustee can take over management of the business without the need for court intervention. This provides operational continuity for your business and prevents things from grinding to a halt.
The alternative is for the probate court to oversee the management of your business, which can severely hinder business operations. If the court has to appoint a receiver, this incurs additional costs that take away from what your Beneficiaries would otherwise receive.
By placing your business interests into a Revocable Living Trust, you can provide authority to carry on business after death or incapacity. This ensures the business can discharge its obligations, including employee management, inventory acquisition, payroll, etc.
5. A Trust Can Provide Protections for Minor Children
A Revocable Living Trust can also provide protection for minor children. Your Trust Agreement lay out a structured distribution plan for the time your children are minors, and even into adulthood.
The terms of your Trust can provide for current needs while also providing assurance of proper asset management. By placing the assets in a trust subject to a spendthrift provision, you can also provide protection from potential creditors or lawsuits. This provision keeps the Trust assets under separate legal ownership, so your children’s creditors have no right to get money from the Trust.
A minor child cannot legally hold property in his or her own name. Someone else must manage that legacy on the child’s behalf. If a minor child is a direct beneficiary of an estate or an asset like life insurance, there may have to be a Guardian of Property appointed to manage the assets until adulthood.
But when you pass on a legacy through a Revocable Living Trust, the Trust Agreement can provide terms for how to handle this situation. The Successor Trustee would hold these assets until a specified time or upon satisfying a specific condition. There is no need for a Guardianship of Property because the Successor Trustee will handle things until the appointed time.
Your Trust can also provide reasonable reimbursements to the Guardian for the responsibility taken on to care for your minor children. That way, the Guardian is not put into financial hardship.
Final Thoughts About Revocable Living Trust Benefits
A Revocable Living Trust provides a range of benefits for individuals and families in Tennessee. These benefits can apply to many types of household situations, not just those with large estates.
Though creating a Revocable Living Trust is a larger investment with more work required upfront than just a Will, it comes with tremendous benefits for those who choose this estate planning vehicle.
If you are considering a Revocable Living Trust as part of your Tennessee estate pan, it’s important to work with an estate planning attorney. A professional will draft the Trust correctly and see to it that the instrument accomplishes your goals.
Reach out to Connell Law, PLLC for your estate planning consultation today to discuss if a Revocable Living Trust is right for you.
