In many ways a revocable living trust is similar to a Will: both allow you to leave money and property to loved ones at your death. However, while a Will can help to distribute your property after you die, a revocable living trust allows you to create a separate entity to hold your assets while you are still alive and also lets you keep more control over when and to whom your property should be distributed.
For example, suppose you leave your entire estate to your son in your Will. If he later dies or divorces, you would have no control over where your money could end up. Your daughter-in-law (or ex-daughter-in-law) could end up with much or all of your funds. She would then be free to leave your money to anyone she chooses at her death, possibly omitting your son’s children (your grandchildren) entirely. A revocable living trust protects your family against such a scenario, making sure your grandchildren benefit from your estate. For instance, you could name your son as your successor trustee, allowing him to draw income (and possibly principal) during his lifetime. When he died the trust would end and the funds would be distributed to your grandchildren directly. This is an excellent option for making sure your assets ‘stay in the family.’
A revocable living trust also allows for greater control over when assets are distributed to your beneficiaries. If you have minor children or grandchildren, a revocable trust lets you appoint a successor trustee to control the funds until they are responsible enough to handle the inheritance themselves. You can decide at what age they should receive the funds and, in the meantime, your heirs can get money from the trust as needed for school, health care, and other worthwhile purposes.
A revocable living trust is especially important if you are remarried and wish to leave money or property to children from a prior marriage. In Massachusetts, even if you have a will leaving everything to your children, your spouse can elect to receive a sizable portion of your estate. Assets in a living trust that pass to children at death cannot be intercepted by a surviving spouse.
Another important benefit or a revocable living trust is that any assets placed in trust avoid probate. Contrary to popular belief, simply having a Will does not avoid probate. Assets passing under a Will must go through the probate process which involves filing and verifying the will with the local court, appraising property, paying debts and taxes, and distributing the remaining assets to the heirs. Creating and funding a living trust often saves you time and money, since the cost and time required to distribute assets held in a trust are usually significantly less than transferring assets under a will.
While there are many benefits to creating a revocable living trust, seniors interested in protecting assets from potential long-term care costs should be aware that assets in a revocable trust are not protected from MassHealth (Medicaid). For this type of planning, use of an irrevocable trust is advised.
To discuss how adding a trust to your estate plan can protect and benefit you and your family, call the Heritage Law Center for a free consultation.
