Some people are under the impression that trusts are only useful for high net worth families. It is true that there are trusts that are used by people who are wealthy, but there are other types of trusts that can benefit “the rest of us.” One of them is the revocable living trust.
A revocable living trust is a vehicle of asset transfer that provides a great deal of flexibility. When you look at the name of the trust, you get some immediate insight: You can revoke this type of trust at any time. If you were to revoke the trust, it would no longer exist, and you could take back direct personal possession of the assets.
This can be comforting, because you are not taking any risks when you convey assets into a revocable living trust.
The ability to revoke the trust is not the only source of control. The person who creates a revocable living trust is called the grantor of the trust in legal parlance. A trustee is named in the trust declaration, and the grantor can act as the trustee initially.
Because you can act as the trustee when you create a revocable living trust, you are the trust administrator while you are alive and of sound mind. You direct the actions of the trust. Plus, you can also act as the beneficiary at first, so you can receive monetary distributions from the trust.
You name a successor trustee to assume the role after your passing, and you also name successor beneficiaries. After you die, assets will be distributed to the beneficiaries in accordance with your wishes.
When you create a revocable living trust, you are retaining incidents of ownership, because you can revoke the trust entirely and take back personal possession of the assets. Because of the fact that you maintain this level of control, assets in this type of trust are not protected from creditors and claimants seeking redress.
However, in addition to revocable trusts, there are also irrevocable trusts. Since you cannot revoke this type of trust, you are surrendering incidents of ownership, so there are irrevocable trusts that are used for asset protection purposes.
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