Revocable Living Trusts are Companion Trusts

Posted by Ned Armand, President of Eastern Point Trust Company on Jun 3, 2015

Revocable Living Trusts are a good tool to begin to plan for your estate, but they are not the end-all be-all solution to estate planning.

Key Takeaways

  • Revocable trusts compliment irrevocable trusts since they cannot do all that an irrevocable trust can do.
  • Revocable trusts can have changes made during the life of the grantor, but cannot ensure a safe inheritance after the grantor's death.
  • Revocable trusts are often used for probate, but can be rolled into an irrevocable trust prior to death with Kiss Trust.

 

What is a Revocable (or Living) Trust?

Revocable Living Trust (RLTs) are used in many ways as a start to estate planning, but along with a will, may only be the first component to a comprehensive estate inheritance plan. While RLT stands for a Revocable Living Trust, these trusts can also have other names such as revocable trusts, living trusts, or even family trusts. They are more durable than a will but offer less security than an irrevocable living trust. Some people couple an RLT along with their last will and testament due to the flexibility of such a structure. Wills can dictate how non-property items will be handled, such as the guardianship of children or how debts should be paid, while the RLT can avoid probate, ensure privacy or avoid ambiguities.

How It Works

A Revocable Living Trust can be created while the trust maker (grantor) is living and the trust can be changed during the lifetime of the trust maker. The trust maker will change the title of the property to herein become the property of the trust, such as real estate or automobiles. The trust maker can change the terms of the trust, but only while they are living.

What It Accomplishes

An RLT is widely used to avoid probate, the headache-laden process of court-supervised division of property after an estate owner’s death. Sometimes, the trust maker is also the trustee, but that proves to be a challenge in many cases. It can also be used to clearly explain the division of property in an inheritance and increase inheritance privacy upon death.

What It Does Not Accomplish

A Revocable Trust is not a one-stop solution to your trust needs or estate planning needs. A trust managing your assets after your death should be detailed and precise, instead of open-ended and revocable. This is why many trust makers elect to have the assets held with the RLT pour over into an irrevocable trust upon death to control by who, when and how the final estate may be used.  A quick and easy solution for an irrevocable trust can be found at Kiss Trust.

 

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Tags: Irrevocable Trust, revocable trust, Inter Vivos Trust

Inter Vivos (While Living) vs. Testamentary Trust (After Death)

Posted by Ned Armand, President of Eastern Point Trust Company on Nov 12, 2014

During final estate planning, it is all too common for an individual or even their financial advisor to pick the wrong tool for their needs.

One of the more common mistakes is choosing to create an after death trust “by your Last Will and Testament” as opposed to using a while living trust (a trust created by the Grantor while still living).

Testamentary Trust

Inter Vivos Trust, Testamentary Trust, Kiss Trust

The terms of your “Last Will and Testament” may create a testamentary trust by prescribing the terms and conditions of how the trust will be formed with the remainder of your post mortem estate. These after death trusts usually handle the distribution of a deceased individual’s (the settlor) life insurance proceeds and the remaining assets of their estate. Usually, these trusts are formed for the benefit of the deceased’s children and one or more of these testamentary trusts can be “willed” or appointed by the settlor.

A testamentary trust is created after the death of the settlor. The settlor's "Last Will and Testament" executor will appoint a trustee to administer the assets in the trust(s) until the beneficiary (ies) take(s) over or the assets are exhausted inside the trust(s).

Testamentary Disadvantages

Shortfalls of a testamentary trust are:

  • Probate court is directly involved in settling the estate prior to the assets being transferred into the trust. This can result in significant legal fees, penalties, and the process can last for months or even years depending on the circumstance of the settlor’s final estate.
           
  • Having your wishes codified in a trust once you have passed leaves significant room for error and misinterpretation by your executor.
           
  • Provides an opportunity for favoritism or self-dealing by the executor.
           
  • Can create unneeded family tension.

Inter Vivos Trust

An inter vivos trust is created during the grantor’s lifetime and may “sleep” alongside their Will until their passing.

Inter Vivos Advantages

Advantages of Inter Vivos Trusts are:

  • Ensures the trust is drafted exactly as you wish.

  • Avoids the probate process.

  • Reduces the burden, stress and workload on your family and executor.

Keeping Others in Mind

By preventing the estate from being subject to probate, you can save your family members from a lengthy and costly process and also protect their interests by controlling the distribution of your assets in a defined and private manner. Additionally, by preparing in advance, you ensure that the trust contains the exact terms and conditions you intended to create for your heirs, and that they are in place and not open to error, manipulation or misinterpretation by your executor.

You now have the necessary information to know what would work best for you and your family. To further assess which type of trust is best for you download our Inter Vivos Trust Assessment Checklist below!

Download Your FREE Inter Vivos Trust Checklist

 

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Tags: Estate Planning, Testamentary Trust, Inter Vivos Trust

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