Many people mistakenly think that creating an estate plan simply requires you to create a will detailing how your assets will be distributed upon your death. However, estate plans are often more complicated than that, even if you have a smaller estate. One estate tool you may consider adding to your estate plan is a revocable living trust.
What is a revocable living trust?
A trust is created by the grantor during their lifetime will transfer assets into the trust (e.g., cash, investments, property, insurance policies) and designate a trustee to administer the trust and at least one beneficiary. When you pass away, the assets in the trust will go to your named beneficiaries, as specified by the terms of the trust.
Advantages and disadvantages to revocable living trust
There are many advantages and disadvantages to creating a revocable living trust. One of the main advantages is that assets in the revocable trust are still owned by you, and the trust can be changed or revoked any time during your lifetime. Revocable living trusts can also help you maintain privacy, as there is no public record required, and you may be able to help your family avoid the lengthy probate process after you pass away.
However, the extensive costs and maintenance fees of a revocable living trust are often considered a disadvantage. Also, revocable living trusts, unlike other types of trusts, cannot protect your assets from creditors. Finally, because the property in the trust is still yours, it is still taxable and you must report income from the trust on your tax returns.
The benefits of an irrevocable trust generally outweigh the downsides, but these trusts are not necessary for everyone. An estate planning attorney in Kentucky with experience creating wills and trusts can help evaluate your situation and determine what estate tools are best for you.