Revocable living trusts are one of the best tools available today for people interested in protecting inheritances and leaving a strong legacy. Though we have written about revocable living trust numerous times in the past, the inheritance protection benefits these tools can offer are often overlooked. Today we will look at some key facets of revocable living trust in relation to protecting inheritances.
Probate Avoidance and Living Trusts
One of the most important benefits provided by a revocable living trust is its ability to allow you to avoid probate as much as possible. When you transfer title of property into the name of a living trust, the trust effectively becomes the new owner. After you die, therefore, it is the trust that owns the property, and not you. This means that the probate court will not have to determine the outcome the property you leave behind, because it’s not really you leaving it behind, but rather leaving it in the name of the trust.
So, with a living trust, you can usually ensure that your inheritors will receive their inheritances much more quickly, and more cost-effectively, then they would have had the inheritance first gone through the probate process.
In addition to the probate avoidance benefits provided by living trust, there are also other ways you can use these devices to protect inheritances. Because the trust will own the property you transfer into it, and a trustee will have the responsibility of managing the property under the terms you establish, you can use a living trust as a way to protect inheritances from those who might squander them.
For example, let’s say that you create a revocable living trust as a way to transfer inheritances to your two children. Both of your children are relatively young, in their early 20s. As young people, they might not have the maturity and discipline necessary to be able to properly manage a large inheritance.
As a way to protect against the possibility of a mismanaged inheritance, you can use a living trust to pass on structured gifts. For example, you might leave your children one third of their inheritances immediately after your death, another third when they turn 30, and another third upon turning 35. Even more complicated schemes are also possible, such as leaving yearly inheritance gifts, or providing your children with annual incomes derived from the property the trust owns.
Further, because you select the trustee, you can select someone who will help ensure that your children will use their inheritances wisely. You might, for example, choose to give the trustee the authority to distribute trust money only if the trustee believes that money will be used for reasonable purposes, such as paying bills, making a down payment on a home, or paying for college education.
Upcoming Estate Planning Workshops
In later February and early March we will have Estate Planning workshops where one of our attorneys will talk in more detail on this subject. For a schedule of these workshops, click here. If you prefer not to attend a workshop, contact us to request a free consultation!