Revocable Living Trusts

A popular alternative to the traditional living will, the benefits of establishing a revocable living trust has become an acceptable and cost effective method to pass on property to loved ones when you pass away.

Even in states where the probate system is simplest and ineffective, many couples or single people reaching retirement age are investigating the attractions and the possible pitfalls that establishing a revocable living trust might pose them.

An arrangement that can be made to handle the management and distribution of property and assets, a revocable living trust, like a last will and testament, can be established so that it is "revocable." In other words, the trust can be modified or even cancelled at any time.

Established by a trustee, usually a close personal friend, or the family lawyer or an officer of a local bank, the revocable living trust is basically a written agreement or declaration of intent to disperse assets and properties to named benefactors after death. The role of the trustee is to administer the trust and its properties and assets.

The advantage of establishing a revocable living trust is to avoid the payment of estate tax, in the event that the value of the assets of the trust makes it necessary to do so. By establishing a revocable living trust, there will no need or reason for probate in the court system which can be a long drawn out, expensive and distressing experience for the benefactors of the trust.

Anyone can establish a revocable living trust and can even act as their own trustee. Husbands and wives can also establish a joint trust together and can even be joint trustees. However and in any event, it will always be extremely sensible to appoint an alternate trustee. This is in the case where the first trustee passes away and the second trustee if there is one becomes incapacitated.

When drawing up a revocable living trust the principal requirement is to clearly state which assets will be transferred to the trust. Secondly all benefactors must be named.

The flexibility that a revocable living trust presents its share of pluses and minuses. The people, who established the trust, especially if they act as their own trustees, can constantly change and update the trust and the benefactors. They can reduce the value of the trust, and even add to the value of it.

This is one of the principal reasons why an independent trustee should be appointed, although with human emotions being the way they are it doesn't happen as much as it should. The fact is that the law imposes strict obligations and rules on trustees and the obligations to act prudently on behalf of the trust owners is one of them. If the trustee sees that the owners are constantly making changes, particularly to the detriment of the fund, then the trustee can at least advise the owners that this act is not to the benefit of the fund and its benefactors.

If the owner of the trust acts as trustee in partnership with an independent trustee and the owner trustee is constantly making changes to the detriment of the fund, then the independent trustee can petition to the courts on behalf of the benefactors of the trust to prevent possible losses.

This rarely happens, but the safeguard exists. The revocable trust can be an expensive method of preserving capital and assets to be passed on to loved ones. The ability to update, whilse offering is share of advantages, can be problematic for that reason.