Understanding Revocable Living Trusts: A Simple and Effective Estate Planning Tool

When it comes to estate planning, understanding the various tools at your disposal is crucial. One such tool, often overlooked, are revocable living trusts. While there are a few different types of trusts, revocable living trusts offer a simple and effective solution to manage your assets during your lifetime and distribute them efficiently after your death.

At Margerie Law, we know every family is different. We are an estate planning lawyer helping families in Milwaukee, Wauwatosa and Brookfield plan for the future based on each individual circumstance.

In this article, we’ll dive into trusts, specifically revocable living trusts, and if it’s right for you.

What is a Trust?

Let’s start with the basics. The terms “trust” and “living trust” are often used interchangeably. Here are the three parties of a trust we’ll cover in this article:

• Grantor: The person who creates the trust
• Trustee: The individual responsible for managing the assets
• Beneficiaries: Those you choose to receive the assets

Unlike a will, a trust bypasses the lengthy legal probate process. Nonetheless, all types of trusts, including living trusts, manage assets throughout an individual’s life and allocate them following their death.

A trust is a more intricate tool for estate planning than a will. For a more comprehensive comparison between wills and trusts, refer to our article titled “Wills Vs. Trusts.”

What is a Revocable Living Trust?

A revocable living trust, often referred to as simply a revocable trust, allows individuals to manage their assets during their lifetime and dictate how these assets will be distributed upon their passing.

One of the main advantages of revocable living trusts is their flexibility. They can be altered entirely or even canceled at any time during your life.

Difference Between Revocable Trust and Irrevocable Trust

The main difference between a revocable trust and an irrevocable trust lies in the flexibility and control they offer.

• Revocable Trust: Can be modified, altered, or even completely revoked at any time during the grantor’s lifetime. This means the trust can be updated based on changing life circumstances.
• Irrevocable Trust: Once established, cannot be easily changed, amended, or canceled without the consent of the beneficiaries. This lack of flexibility is often balanced by potential benefits such as tax advantages and protection from creditors.

Why Use a Revocable Living Trust?

Families may use a revocable living trust because it provides a high level of privacy, as the assets held within the trust pass to others outside probate.

Additionally, it is active during your lifetime, including if you become ill or disabled. The flexibility is another significant benefit, allowing you to alter its terms or even dissolve it entirely if your circumstances change.

Despite not offering immediate tax benefits, a revocable trust can help reduce lifetime expenses and preserve wealth, making it a powerful tool for protecting your family and assets.

When Should I Create a Revocable Living Trust?

Determining the right time to create a revocable living trust can depend on several factors. If you are under the age of 50, a living trust may not be necessary yet, as it involves years of management.

The trust must be created when the person is considered mentally able to agree to the document, or it won’t be legally binding. A revocable trust can also be beneficial if you want your money to be available immediately after death for those who it will be passed on to.

What Assets Can Be Placed in a Revocable Living Trust?

A variety of assets can be placed in a revocable living trust. Common assets include: real estate properties, valuable personal possessions like jewelry, bank accounts, and investment portfolios. Small business interests can also be included in the trust, allowing for seamless continuity in case of the grantor’s death.

However, it’s worth noting that certain assets, such as retirement accounts and medical savings accounts, may not be ideal or permitted to be held in a revocable trust. An experienced estate planning lawyer can provide guidance on what assets of yours can and should be placed in this trust.

What Are the Disadvantages of Revocable Living Trusts?

Although a revocable living trust offers many advantages as we listed above, there are some potential drawbacks that should be taken into consideration. One of the most significant drawbacks is the lack of tax benefits. Additionally, revocable trusts do not protect you from possible creditors.

Another item to note is that revocable living trusts are usually more expensive to set up than other estate planning tools because of the time required to create one. That is why it’s important to speak with a professional who can help decide if creating one is right for you and your family.

How to Create a Revocable Living Trust in Wisconsin

Considering a revocable living trust is an important step in estate planning. To create a trust, consider working with a qualified estate planning attorney. Margerie Law has years of experience helping families in Milwaukee, Wauwatosa, Brookfield and the surrounding areas protect their futures. Contact us to learn more about the estate planning process today.

By Paul Margerie, Owner of Margerie Law

Paul Margerie of Margerie Law is a knowledgeable and experienced estate planning attorney based in Wauwatosa, WI. With years of experience helping families and individuals with their estate plans, he offers a gentle touch that puts his clients at ease. He understands the sensitive nature of this work and ensures that all details are taken care of with precision and accuracy. He strives to help each client achieve peace of mind that their future is protected by providing personalized advice and creating tailor-made solutions that fit their individual needs.