REVOCABLE LIVING TRUSTS THE

Swiss Army Knife Of Estate Planning

By Ben E. Connor

A trust may seem like an advanced tool only for the wealthiest among us. Such an incorrect view ignores some of the most important benefits of a revocable living trust and has nothing to do with financial worth. The reality is that trusts are a foundational estate planning tool which can greatly impact a person’s well-being in both wealth and health. Indeed, a revocable living trust has a solid history for being highly effective in ensuring a person’s wishes are carried out during life and after they pass. Those wishes cover a broad field of important planning options available to you -- i.e., avoidance of court ordered probate; avoidance of a court ordered conservatorship; ensuring that your assets do not wind up in the hands of a sly spousal predator rather than your surviving spouse; ensuring that your assets go to the loved ones that you desire rather than to those relatives who are the most cunning; ensure that any bequest intended for your children do not wind up in the hands of an ex in-law due to divorce; ensuring that your assets intended for your loved ones do not end up in the hands of the wrong person due to a court ordered judgment or creditor lien; ensuring that your health care wishes are respected and ensuring that your end of life desires are followed. You can protect yourself from all of these scenarios with good planning which must be completed while you are still living and have the capacity to sign the necessary legal documents.

What action must you take? First, find an experienced estate planning attorney and begin creating your estate plan now. The better thought-out plans likely take a few weeks to perfect. The process begins with the maker of a trust – commonly referred to as the trust maker, grantor, settlor, or trustor – transferring his or her ownership of certain assets to the trust. A trustee is then appointed and given proper legal authority to manage the assets for the beneficiary (or beneficiaries) of the trust. In a “standard” revocable living trust, you are the trust maker, the trustee, and the beneficiary while you are alive. If you become incapacitated or die, your designated successor trustee and beneficiaries take over.

Types Of Trusts

There are a broad variety of trusts and options available to you to fit your estate planning needs.

Revocable Living Trusts

Revocable Living Trusts are the foundation of almost all estate plans and are by far the most commonly used trusts. Revocable Living Trusts along with their accompanying documents (Financial Powers of Attorney, Health Care Powers of Attorney, HIPAA Authority, Living Will, plus several other legal documents.) are the most common and powerful estate planning tools used today. They contain your instructions for how your health care desires and assets will be handled upon your incapacity or passing. Since these trusts and their accompanying health care documents are revocable, you can change or cancel provisions at any time during your life.

Beneficiary Controlled Trusts

In this scenario, the beneficiary – typically the grantor’s child or grandchild - is also the trustee. He or she has the discretion to distribute assets to him or her for health, maintenance, education, or support. There is a co-trustee, who can be removed by the beneficiary/ trustee, with the authority to access the trust for the benefit of the beneficiary beyond his or her health, maintenance, education, or support.

Incentive Trusts

These trusts typically contain provisions to encourage or discourage certain behavior and promote family values. In order for the beneficiary to receive funds from the trust, he or she must adhere to the particular requirements set forth by the grantor.

Asset Protection Trusts

These trusts offer perhaps the strongest financial protection against creditors, lawsuits, and judgments. In some types of asset protection trusts, the trust maker can also be a beneficiary, allowing him or her to still receive the benefits of the assets. Protective legal language and proper management of the trust are critical when you use these trusts. Utah has one of the most effective asset protection trusts in the country which is referred to as the Utah Domestic Asset Protection Trust.

Life Insurance Trusts

This is an irrevocable trust that is set up specifically to own a life insurance policy. Ownership in an existing life insurance policy may be transferred to the trust or the trust can purchase the policy directly. The settlor cannot serve as the trustee and he or she relinquishes any right to dissolve the trust or make any changes to it. These can be a great fit for anyone with a large life insurance policy and whose estate is subject to estate taxes.

Testamentary Trusts

This trust does not become effective until the grantor passes away. Testamentary trusts are generally made within a will. The will becomes effective immediately, but the trust is not created until the maker of the will dies. Unlike living trusts, testamentary trusts do not avoid probate – the legal process by which a court oversees the distribution of assets from a deceased’s estate.

Seek Professional Advice

Estate planning may feel complicated, but it can be an enlightening and easy process when you have the right attorney to guide you. It’s critical that your attorney take time to ensure you are educated about the options that are available to you. There are many decisions to be made by you. It’s important that your knowledge level is enhanced to a higher level of understanding.

It is very important for you to take an active part in deciding which options you wish to incorporate in your estate plan. After all, your choices will have a life-changing impact on those you love for the remainder of their lives and the lives of your grandchildren. Good luck in your planning! We’d love to connect with you to answer questions and help you meet your goals.

Ben E. Connor Attorney The Connor Law Firm, PLC 20 North Main Street, Suite 301, St. George, Utah 84770 (435) 359-1414