A revocable living trust is a very popular and effective estate planning tool. But consumer protection agencies, like the Wisconsin Bureau of Consumer Protection, caution consumers to be careful shoppers when it comes to establishing a living trust.

What is a Revocable Living Trust?

A trust is a written instrument that designates one or more individuals to manage property for the benefit of others. A trust is revocable if the terms of the instrument allow you to change or terminate the trust during your lifetime, provided that you are competent to do so. A trust is living if you establish it during your lifetime.

There are three parties to a trust. The settlor is the person who creates the trust. The trustee is the person who is designated to manage the trust and its property. The beneficiaries are the individuals who are entitled to receive the income and assets of the trust as directed in the trust instrument. For many people who establish a revocable living trust, they serve all three of these roles during their lifetime and competency.

What are the Advantages of a Revocable Living Trust?

There are several advantages to a revocable living trust – too many to mention in this article. But a few of the benefits that my clients find appealing are:

– Avoiding Probate: A probate is a legal proceeding that can involve significant cost and delays upon your death. And, probate records are part of the public record, thus the probate process and your financial information are not kept confidential. A properly funded trust avoids the need for a probate proceeding, and the administration of the trust upon your death is confidential. Also, if you own real estate in other states, those properties can be titled under your trust as well in order to avoid a probate in those states.

– Property Management: A trust can be a great tool to provide for the management and protection of property for the benefit of someone who is not able to receive or manage it. This could include minor children, elderly or disabled individuals, incapacitated individuals, or perhaps individuals who are receiving government benefits due to a disability. Furthermore, if you had a living trust established and later became disabled or otherwise unable to manage your property, your successor trustee could do so on your behalf without the need to go to court to establish a guardianship or conservatorship.

– Asset Protection: With a proper spendthrift provision built into your trust, assets that you have placed in the trust for the benefit of other individuals can be protected from their legal problems, judgments, and creditors. The law supports such spendthrift provisions to help ensure that your trust assets are not threatened or diverted from the purpose for which the trust was created.

– Restricting the Use of Assets: A trust can specify the purpose for which trust assets may be used, and the manner in which they are distributed. The trust instrument can grant broad discretion to the trustee, permitting distribution for things such as the beneficiary’s health, maintenance and support. Or, the distribution standards could focus primarily on providing for a beneficiary’s educational needs. If a beneficiary is disabled and receiving asset-tested government benefits, the trust instrument could include special needs trust provisions to ensure that the trust assets are used to supplement the government benefits without jeopardizing them.

Beware of Scams!

The Wisconsin Bureau of Consumer Protection cautions consumers to avoid scams that target people with seminars, workshops, door-to-door contacts, and other methods of selling trusts to consumers. Our senior citizens are especially targeted and vulnerable to these practices. Take a minute or two to read the LivingTrusts144 bulletin that the Bureau of Consumer Protection posted on this subject. The bulletin correctly points out that:

– Representatives who work for companies selling trusts may misrepresent the facts, the law, or the legal process just to make a sale.

– Standard trust forms and do-it-yourself kits may not address your individual needs and circumstances.

– Mail order trusts can be just as costly, or more so, than trusts drafted by an attorney.

– Generally, state law requires that an attorney draft the trust.

– Avoid high pressure sales tactics and pitches by salespeople selling estate planning tools.

– Avoid salespeople claiming that their products are endorsed by AARP.

– Be sure that your trust is properly funded at the time it is established.

– A trust is a legal document and should be drafted by a highly trained attorney.

– A poorly drafted and executed trust could result in costly legal fees for your survivors.

Be Sure Your Revocable Trust Fits Your Needs

A living trust can be a very effective and useful estate planning tool, and can help protect your assets for your beneficiaries for years to come. However, a living trust should be specifically customized to meet your individual needs. An experienced estate planning attorney can ensure that your trust is properly drafted to fit your situation, and properly funded to avoid probate. Contact Kosa Law Office today to schedule an appointment to discuss your particular estate planning needs.