A lot of people harbor certain misconceptions about trusts. The idea is that these legal devices are only useful for wealthy people, and there is also the notion that you surrender all control of assets that you convey into any type of trust.
In fact, there are different types of trusts, and they serve varying different purposes. One major distinction between the types of trusts is the power of revocation. You can revoke or dissolve some trusts, there are trusts that are irrevocable.
A revocable living trust can be a good choice for a wide range of people, and you do not necessarily have to be a millionaire to realize the benefits. When you establish a revocable living trust, you are called the grantor of the trust. The trustee is the person who administers the trust, and the beneficiary is the individual who can receive monetary distributions from the trust.
You continue to control assets that you convey into a revocable living trust, because you can act as the trustee while you are alive and well, and you can also act as the beneficiary. If you ever choose to do so, you can dissolve the trust entirely and take back direct personal possession of the property, so your control is comprehensive.
In legal terms, you are retaining incidents of ownership when you establish a living trust, because you do maintain this level of control. As a result, assets that are contained within a living trust would not be protected if you were to become the target of a lawsuit. However, there are irrevocable trusts can provide asset protection.
Though a living trust will not protect assets, there are other benefits. For one, you do not have to allow for lump-sum distributions to the inheritors. In the trust declaration, you name a successor trustee to take over after you pass away, and you name a successor beneficiary (or beneficiaries). To prolong the viability of the trust, you could instruct the trustee to distribute limited assets over an extended period of the time.
You can also account for incapacity when you establish a revocable living trust. It would be possible to empower the successor trustee to administer the trust in the event of your incapacitation.
Another major advantage that you would gain if you utilize a living trust as the centerpiece of your estate plan is the avoidance of probate. A will must be admitted to probate, and the heirs cannot receive their inheritances while this process is underway. Probate will take close to a year, even if things go smoothly, and expenses can pile up during the process.
Assets in a living trust can be distributed outside of probate.
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If you would like to discuss living trusts or any other estate planning matter with a licensed professional, send us a message through this link to set up a consultation: Burlington VT Estate Planning Attorneys.