Are you like other New York residents who think that only the rich and famous benefit from trusts? If so, you need to know that just about anyone can benefit from a trust. As you ponder how you want to structure your estate plan, don’t discount using a trust.
You could derive numerous benefits from using a trust. Many people decide to use a revocable living trust, which can serve them during life, in the event of incapacitation, and after death.
Part one — during your life
The hallmark of a revocable living trust is that you can make changes to it or even terminate it during your life as its creator, or grantor. You can also be its beneficiary and trustee. You can add or subtract property from the trust as needed. During your life and as long as your trust is revocable, you retain legal ownership of the property it holds. This means that the trust does not pay taxes separately from you.
Part two — during your incapacitation
If you reach a point in your life where you can no longer make decisions for yourself due to an illness or injury, the individual you named as your successor trustee in the trust can step in and handle the administration of the trust on your behalf.
It may go without saying that you need to choose this individual carefully. Pick someone that you trust, who understands your wishes and vows to carry them out in your stead. In most cases, the trust provides for a medical or psychological affirmation of your incapacitation before the successor trustee takes the reigns.
Part three — after your death
Upon your death, your trust becomes irrevocable. This means that no further changes to its terms or the property within it may occur. The successor trustee takes care of any final expenses and taxes and then distributes the property in the trust to the successor beneficiary or beneficiaries in accordance with the terms you expressed in it.
Part four — avoiding probate
Another benefit of a revocable living trust rests in the fact that the assets it holds do not go through probate. Since the trust becomes irrevocable upon your death, you no longer technically own the property in it. However, the IRS may still collect estate taxes on the property within the trust since it shares your Social Security number during life, which to the IRS, means that you still own the property.
You may find the benefits of a revocable living trust suit your estate planning goals. In order to make this trust work for you in the best way possible, you may want to obtain some help in setting it up properly.