What is a Revocable Living Trust?
Phelps LaClair is one of the premiere estate planning law firms in the Phoenix area. We design and create an estate plan that is unique for each client. We often get asked, “What is a revocable living trust, and why do I need one?” Most people believe a will is the best way to convey an estate to their heirs. But that is often not the case.
What is a Revocable Living Trust?
A revocable living trust is different from a will. At its most basic level, a revocable living trust is a document that allows you to transfer assets to a beneficiary after you have passed away. By placing your assets in a trust, you give ownership of those assets to the trust, but you still maintain control over them as long as you are alive. When you die, the assets will be distributed to your beneficiaries according to your instructions, not the instructions of a court. There are many benefits of a living trust over a will.
Grantor and Trustee
When you create a revocable living trust, you become the grantor and you can name yourself as the trustee. While you no longer own the assets, as the trustee, you maintain control of the assets in trust while you are living. You can manage them, sell them, invest them or give them away, just as if you still owned them. All gains or losses will be the property of the trust.
Because the trust is revocable, you, as the grantor, can change or dissolve it at any time. You can transfer assets into or out of the trust as you see fit.
When you create a revocable living trust, you also need to name a successor trustee. This person will continue to manage the trust and distribute the assets to the beneficiaries, according to instructions you specify in the trust. The assets in the trust will go to the beneficiaries without any estate tax burden, and the successor trustee will close out the trust. If you only have a will, the entire estate will be subject to taxation.
With a revocable living trust, your estate can be settled privately without going through probate. In Arizona, properties outside of a trust – as in a will, for example—must go through the probate process. This is an expensive and time-consuming process that you can avoid with a revocable living trust. Probate often costs thousands of dollars and can take anywhere from many months to many years to settle. The court will eventually decide what happens to your estate—and it may not be what you wanted.
Layers of Protection
With a revocable living trust, you determine how and when the designated beneficiaries receive their distribution. You can design protection into the trust so that your beneficiaries’ inheritances cannot be touched by their ex-spouses or creditors. You can also protect those who might be at risk for irresponsible behavior upon receiving a large amount of money. In addition, it offers protection to minor children from judicial control of their inheritance. If a revocable living trust is ever challenged, it is much more difficult for a claimant to contest.
Your Living Trust
A revocable living trust is a document that is custom designed for you. There are no one-size-fits-all solutions. Every trust we write is tailored for our clients’ individual needs and goals. Whether you have a very large or very modest estate, Phelps LaClair has the experience and expertise to create an estate plan that will serve you and your family well into the future. Call us today for a free no-obligation consultation so we can discuss your needs. Do you need a living trust? Undoubtedly, yes you do—for your sake, for your family’s sake, and for the sake of future generations!
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