Many estate planning tools are available for people to use, including the very popular revocable trust. This legal arrangement is essential in estate planning and frequently used because it allows individuals to control their assets while they are alive and mentally competent and to decide what to do with the assets after their death.
The grantor is the individual who funds the revocable trust, and they have complete control over the assets in the trust. They can decide what to do with them, whether to keep the money to care for themselves in the later stages of life or distribute assets among their children and other family members at any point.
Why is it called a “revocable” trust?
This legal estate planning tool is called a revocable trust because the grantor can manage, change, fund and remove assets from it as they wish during their lifetime and as long as they are mentally competent. In contrast to irrevocable trusts, for example, which are also legal estate planning tools but restrict the grantor from making changes to it once the grantor creates the trust.
What are the benefits of having a revocable trust?
Primarily, the grantor has complete control over their assets and can make changes at any time while they are alive and mentally competent. This is important because life circumstances change, and controlling one’s assets is helpful. In addition, revocable trusts:
- Avoid the process of probate
- Is a private estate planning tool
- Allows the grantor to keep control of their assets
- Are easy to create and change
- Can supplement or replace a will
While many estate planning tools exist, revocable trusts are highly popular because of their flexibility and benefits. However, there are also downsides, such as the fact that a revocable trust does not protect the assets from creditors if the grantor owes money.
This could be important if the grantor passes away and leaves assets for their children in the trust but owes creditors. Creditors can collect from the grantor’s estate before the children receive assets.
Among the many estate planning tools, revocable trusts are useful and popular. Ensure to understand all estate planning tools before you decide what to use, as every situation is different.