If you are about to embark on estate planning as a Maryland resident, you probably have heard several unfamiliar terms. One of those is a revocable living trust. This tool is an integral part of estate planning, but it’s not for everyone. Here is what you need to know to make an informed decision.
Understanding revocable living trusts
This estate planning instrument goes by several names, including revocable trust or living trust. It is a way to manage assets during your lifetime and designate how to distribute them upon your death. These types of trusts are also useful for managing your assets if you become incapacitated. Perhaps the biggest advantage of creating a revocable trust is that it avoids probate following your passing because trust assets are considered non-probate property.
Revocable living trusts have several advantages. These include:
• Minimizing or avoiding probate or ancillary probate
• Managing your affairs during your life
• Ensuring privacy regarding your financial affairs
At the same time, these trusts also have disadvantages, including:
• Complexity, involving funding the trust
• Funding the trust can be difficult in some circumstances
• The cost of drafting a trust is more than for drafting a will but it may pay dividends in the long run
Dealing with revocable trust misconceptions
The goal of any type of trust is to accomplish your estate planning goals. You can listen to legal counsel about whether or not a particular type of trust is in your bestinterests, but you can also read documents explaining what each type of trust will do for you and talk to financial advisors who can recommend a course of action.
The larger your estate is, the more you should consider the different types of trusts that are available to you. For some individuals and couples, combining a living revocable trust with other types of estate planning instruments is an ideal situation. Unlike an irrevocable trust, you can always change the revocable trust into another type if your needs change. Reviewing your estate plan regularly will ensure that you have the best possible plan for your assets and your heirs.