Many people use trusts as estate
planning tools, and an especially popular type of trust is the revocable
living trust. It's an arrangement that you make, while you're alive,
for the management and distribution of your property. This type of trust
offers significant advantages, but it also has disadvantages, so it's
not right for everyone. Here are some of the pros and cons:
ADVANTAGES:
• AVOIDANCE OF PROBATE: Probate
is the legal process under which your estate is administered when you
die. It can be a slow and costly process. If you've transferred all of
your property to your trustee before your death, all distributions of
your property are handled through the trust, so there's no need for
probate. This means that the distribution of your assets could
potentially be much quicker and smoother.
• AVOIDANCE OF GUARDIANSHIP: If
you become incapacitated to the point that you can't take care of your
own affairs, and you haven't planned ahead for this situation, your
family will need to go through court proceedings to have a guardian
appointed for you. If you have a revocable living trust that's properly
funded, then your trustee already has the authority to manage your
financial affairs for you, and you should be able to avoid having a
guardian appointed.
• PRIVACY: If you have a will
that needs to be probated, that will is filed in court and becomes a
matter of public record. This is not the case with a trust instrument.
Under ordinary circumstances, a trust instrument will not need to be
filed in court, so what you do with your property remains private.
DISADVANTAGES:
• EXPENSE: There's an initial
cost involved in drawing up the trust document, and there are also
costs involved in transferring property to the trustee in order to fund
the trust. Once the trust is funded, the trustee actually starts
performing his or her duties in administering the trust, and that means
he or she is entitled to be paid for those services. You should weigh
the cost of establishing and maintaining a trust against the benefit
you'll get from the trust.
• POTENTIAL INCONVENIENCE: Certain
types of property, such as cars and Subchapter S stock, are more
difficult to manage if they're held as trust properties. Also, there is
additional bookkeeping involved in maintaining a trust. You should check
with an estate planning attorney about what issues your particular
situation might present.
• NO PROTECTION FROM CREDITORS: Because
you can change or end a Revocable Living Trust at any point during your
lifetime, the assets in the trust are not protected from creditors.
Once you die, the trust property does not go through probate. If you're
worried about creditor claims, this can be a disadvantage. Under probate
laws, creditors have deadlines for making claims against an estate. If
they miss the deadline, they lose the right to collect on the debt
forever.
The revocable living trust is not a one-size-fits-all estate planning solution.
Article Source: http://EzineArticles.com/4545038
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