First let’s talk about what a revocable living trust doesn’t provide- this is often one of the most common misconceptions and can be a devastating one. As the name implies, a revocable trust is one that can be revoked, changed or cancelled at any time. This power to revoke results is what is known as a “grantor trust,” which means there are no specific tax benefits to the grantor, the person who transfers property into the trust. All taxes originated in the trust are reported on the grantor’s income tax return, and at death the trust will be included the grantor’s estate for estate tax purposes.

Nevertheless, there are many advantages to obtaining a revocable living trust. Here is an example of one family able to utilize these advantages.

Don and Mary are very private people, who are looking for the best avenue to manage their assets in the event of incapacitation or death. Under the current laws, they will not be faced with estate tax issues. However, they have a wide array of assets (real estate, stock, general partnership interests, life insurance, personal effects, etc.) and don’t feel that either Mary or their 2 children would be capable of handling these assets on their own, as they lack experience in financial and investment matters. On the other hand, Don wants to keep these same assets under his own management as long as he can.

After talking with their Life Planner about their unique situation and the options available to them, Don and Mary decide to set up a revocable living trust. The most prominent benefit they see is that professional management of the trust is available should Don become incompetent, disabled or decides he no longer wants to manage the trust himself. They also liked the fact that a successor trustee will be able to step in and manage the trust’s assets immediately if Don were to pass away. This gave him peace of mind to know that Mary or the children would be taken care of and not overwhelmed. Additionally, if they wanted the trust designed to do so and the beneficiary of the policy was named as the trust, any proceeds from life insurance could be collected immediately after the insured dies and used to provide for the family without any need for court approval. An added bonus for Don and Mary was the ability to protect their privacy and avoid probate as a revocable living trust is not subject to probate administration. This can alleviate a lengthy waiting period for the beneficiaries to receive the assets, as well as afford more privacy as to who gets the trust assets, when they receive them, and how much they receive.

So, what’s the bottom line? Perhaps a revocable living trust is something that you should speak with your life planner about. Maybe it seems like an exact fit for your situation. Or… perhaps it has some features you do not feel are pertinent or even a lack of some features you feel you need. The good news: this type of trust is only one of hundreds of ways you can plan for your estate. Fortunately you only die once, but that means you only have one chance to do it right. I encourage you to work with a life planner who has helped several families in many different situations just like yours plan for the grand finale.

Securities & Advisory Services offered through VSR Financial Services, Inc., a Registered Investment Adviser and Member FINRA/SIPC. Kennedy Financial Services is independent of VSR Financial Services, Inc. VSR does not provide tax or legal advice. A revocable living trust and other legal documents must be drawn up by a qualified attorney.