June 4, 2014 | By fischer |
The concept of a family trust, or revocable living trust, is often misunderstood. However, as creating a family trust is a significant decision which can form the foundation of your family’s future financial security, it is important to eliminate any questions surrounding them.
What Happens When You Set Up a Family Trust
When set up correctly, a trust helps you avoid probate. It can hold your assets during your lifetime, or you can leave assets to the trust at your death, and it dictates what happens to these assets after your death or incapacity. Although the trust itself, not the individual, is the owner, there will be someone appointed to manage the trust after your death or disability. The person is called the trustee and he or she is legally obligated to carry out the terms in the trust. If the trustee fails, he or she can be held civilly or even criminally liable. This why you should appoint a responsible and trustworthy successor trustee.
Transferring financial assets to the trust is quite easy, but people often make the mistake of thinking that assets automatically get put into the trust. They don’t! Assuming you set up a revocable trust, not an irrevocable life insurance trust, you can even change the trust and the beneficiary whenever you like. This means that over time, you can make adjustments that you think are necessary.
Why Should You Set Up a Revocable Living Trust
Financial control is the number one reason why people set up a family trust. They want to make sure their hard-earned money lands in the right place once they die or become incapacitated. The trustee takes over and they don’t have to worry.
Such control is extremely important so that your assets are available for your benefit. You are giving selected individuals access to your money in order to care for you when you are disabled. They don’t have to go through a time-consuming and expensive process in the court just to get the money. Another important health benefit of having a family trust is the health powers of attorney. Someone you trust is in charge of making medical decisions for you.
And what if you die? The revocable living trust protects your assets against undisciplined spending, since you get to decide when and how the beneficiaries can get money from the trust. It gives you peace of mind of knowing your money will be used as you want it to be used.
What about you? Have you set up a family trust? If you haven’t yet, consult an attorney in the state you live in. Laws on family trust different from state to state. That’s why it’s important to talk to an attorney first. Ask him or her for professional legal advice and have your questions answered before making any decisions.
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