3 Benefits of a Revocable Living Trust
Hi, it’s Guy DiMartino. I am a Northwest Indiana estate planning and probate lawyer. And today I’d like to talk about three benefits that you may see in a revocable living trust. A revocable living trust is a trust that you set up as the grantor, and most of the time you are also the trustee. So what you have done with this trust, is that you have taken your stuff, your assets, personal property, real property, whatever stuff you want, and you put it into a box.
The box is the trust. Because the trust is revocable, you can go into that box anytime you want and move things around, play with your stuff, sell things, give things away. You can do whatever you want, it’s your box. That’s why it is revocable. So the three benefits that we see from a revocable living trust, and there are many more, but the three that I’m going to talk about today are
(1) your family gets to avoid the probate process once you pass away, because you as the individual, do not own the stuff that’s in the trust. After you die, if you are the initial trustee, the successor trustee comes in and manages the trust according to the terms that you put together when you prepared the trust. So that means that your stuff does not have to go into court and get divided by a Judge. Your private affairs will not become part of the public record. People will not see an inventory of your stuff and the fair market value of your stuff. So with the trust, there’s more privacy.
(2) The second thing that you can do when setting up a revocable trust is provide income for family members , loved ones or charities. Because its your stuff, and you are in charge, you can do whatever you want – like provide income to beneficiaries who may need it to live. These folks would be called income beneficiaries. And this could happen during your lifetime or after you pass away. For instance, maybe there’s a family farm that’s in your trust and the family farm is producing income on a yearly basis. You have the ability in the trust document, to distribute the income to the beneficiaries. T
(3) The third thing that you can do with a revocable trust, but not for yourself if you are the grantor and the trustee is provide asset protection for your beneficiaries, which will protect your stuff from the beneficiaries’ creditors.
In this situation, you will leave your stuff to your beneficiaries in separate share trusts within your trust. If a particular beneficiary is not the trustee of that particular box of stuff, then the beneficiary will have protection from creditors. For instance, if you pass away and you distribute your trust assets to your three children that are remaining in separate share trusts. So that means your stuff goes into three different boxes for child A, child B and child C, and then you have a trustee that is managing those separate shared trusts. The trust’s assets will be protected from creditors, from divorce and from other situations where the money can be lost.
Here is another example, if child A is married to daughter-in-law B, and you don’t care for daughter-in-law B and you do not want daughter-in-law B to get the money that you’re going to leave to your child A, you can put their inheritance into a separate share trust. You can have somebody else be the trustee or co-trustee with your child A. Because there is a co-trustee your child does not have the ability to get at those funds directly. And because of this structure, if he gets divorced from his wife, your daughter-in-law does not have the ability to go in box and pluck out some of the money.
In conclusion, 3 benefits of a revocable living trust include (1) avoiding probate; (2) providing income channels for yourself or beneficiaries; and (3) providing asset protection for beneficiaries