Revocable Living Trust
Gives you control over how and when your assets are distributed when you die or become incapacitated
This is the most common type of trust, and Quiroga says that almost anyone with assets could benefit from including one in their estate plan. A revocable trust keeps the assets it contains out of probate, protects them from creditors or a failed marriage, and allows you to spell out exactly how you want them to be distributed upon your death.
It’s called “revocable” because it can be changed at any time. “If there’s a change in your family situation—divorce, birth of grandkids, sale of a business, loss of a family member, tax law changes—you have the flexibility to amend your document,” Quiroga says.
How it works: With the help of your estate planning attorney, you create the trust, put assets into it, and name yourself as trustee (the person who will manage the trust). You also name beneficiaries and a successor trustee who will manage your affairs, according to the terms you included in the trust, if you become incapacitated or die. For example, you could stipulate that each of your children will get a specific stipend from the trust’s income every month, but will have access to the principal only for higher-education costs or a healthcare emergency.
“It’s up to you how much control you want to put into the document,” Quiroga says. “It can be just 15 pages or as thick as a Yellow Pages directory.”
Once you’ve set up your living trust, you need to fund it. If you don’t, there will be no assets to deliver to your beneficiaries. “It’s the simplest thing to do—yet it’s the most common mistake I see,” Quiroga says. “Just retitle your assets in the name of the trust.”
Other types of trusts
While revocable living trusts are flexible tools in many wealth transfer plans, those with specific needs may want to explore other types of trusts that may align with their situation. Talk to your estate planner and wealth advisor about whether any of these would be a good fit for you.