In planning for the future and ensuring that you take care of your loved ones, estate planning is a critical and necessary step. One commonly used tool for managing your assets and providing for your family is a revocable trust.
A revocable trust, also known as a “living trust,” is a legal arrangement that allows you to manage and distribute your assets during your lifetime and after you pass away.
There is one feature about revocable trusts that gives them their name: that you can change them or revoke them altogether if your circumstances or wishes change.
Key elements
As with any estate planning tool, there are special terms to define the parties that take part in the arrangement and terms that the law uses to define this specific type of trust. For instance:
- Grantor, trustee and beneficiaries: people involved in the creation, distribution or those who benefit from the assets in the trust.
- Assets: What a revocable trust holds, such as real estate, bank accounts, investments, and personal property.
- Revocability: As the name suggests, you can revoke this type of trust during your life, which is why it is also called a “living trust.”
There are many reasons people choose to create trusts. Among them is privacy, because anything inside the trust and the people associated with it is private, as well as the ability to avoid the legal process of probate.
Probate avoidance is one of the most attractive features that revocable trusts offer because probate is a court-supervised process versus a private process, and it can be very costly. In addition, if assets go through probate, it can take a long time for the distribution of those assets to take place.
Revocable trusts in general
When you properly tailor your estate planning to your specific circumstances, it can go a long way in securing your family’s future and, ultimately, your legacy. That’s why it is essential to consult with a qualified professional who can help guide you in making the right estate planning decisions.