A revocable living trust is a legal document that allows the creator, known as the grantor, to manage their assets during their lifetime and dictate how to distribute those assets after their death.
Understanding what a revocable living trust is can help you with your estate planning.
Benefits of a revocable living trust
One of the primary benefits of a revocable living trust is the ability to bypass probate. Probate can be time-consuming and costly, but a trust allows for a more efficient transfer of assets to beneficiaries. Another advantage is privacy. While wills become public record during probate, the terms of a trust remain private.
Additionally, trusts offer flexibility, as the grantor can amend or revoke the trust at any time while alive and mentally competent. Trusts also allow for better incapacity planning. If the grantor becomes unable to manage their affairs, a successor trustee can step in without the need for court intervention.
Drawbacks to consider
Although revocable living trusts offer many advantages, they are not without drawbacks. Setting up a trust can be more expensive upfront compared to a simple will. Managing the trust also requires transferring assets into the trust’s ownership, which can be time-consuming.
Furthermore, a revocable living trust does not protect assets from creditors during the grantor’s lifetime. Since the grantor maintains control over the trust assets, they remain part of the taxable estate in Indiana, meaning the trust does not provide tax advantages over other estate planning options.
Making informed decisions for the future
Establishing a revocable living trust is a significant decision that requires careful thought. Understanding the unique aspects of trusts can help ensure the right tools are used to achieve estate planning goals.
