It is always a good idea to get important documents, accounts, and information squared away before you actually have to. What is a revocable trust, and do you need one?
Important Terms You Should Know
As with all legal matters, trusts come with several vocabulary words that not everyone is familiar with right off the bat. Let’s talk about a few terms you should know and how they relate to the legal process.
A trust is simply a legal agreement that states the assets you possess, who has authority over those assets, and who receives those assets when you die.
As the creator of a living trust, you are the “grantor.” Everything in the trust belongs to you, but someone else may take care of it when you pass away.
A trustee is someone with the authority to act in your stead should you become unable. A trustee generally handles finances, guardianship of minors, asset liquidation, and more.
A beneficiary is someone to whom you intend to leave all or some of your assets upon death.
Legally speaking, “revocable” simply means that you can change the conditions of your trust at any time. It is always a good idea to reevaluate your affairs after any major life event, such as marriage, children, divorce, job change, or a significant shift in income.
Likewise, an irrevocable trust cannot be changed. Once you sign, it is permanent.
The Purpose of a Revocable Trust
At its core, a revocable trust (also known as a living trust) is a written document that describes how your assets benefit you during your lifetime, as well as what happens to them when you die. A revocable trust generally speaks to your assets in three possible scenarios.
First, your trust simply acts as a “holding place” for your income and assets while you are healthy. Unless you specify otherwise, you maintain complete control over your money, property, and assets while you are young and healthy.
Second, your revocable trust allows you to name a trustee who will oversee your assets in the event that you become mentally or physically disabled. In a nutshell, you are granting another person legal authority to act in your stead should you become unable. Your trustee may care for your assets temporarily until a minor beneficiary (usually a son or daughter) comes of age.
Thirdly, your trust may fill in holes in your will after you pass away. Anything not specified in your Last Will and Testament, your trustee will care for in your absence. Remember this when you are creating your will. If you have definite wishes, make sure you specify them in your will so that no one mistakenly disregards them later.
Other Legal Documents You Should Gather
Your trust is important, but it isn’t the only end-of-life document you need to take care of. No matter how young you are, make sure you gather these items early.
- Last Will and Testament
- Self-Proving Affidavit
- Social Security Information
- Insurance (including life insurance)
- Property Deeds and Titles
- Tax Paperwork
- Income History
- Bank Account Information
If you aren’t sure where to locate some of the above information, you can contact a lawyer. A legal expert can help make sure that your documents are binding, meaning that your final wishes will be carried out. Getting your affairs in order ahead of time also eases the process for loved ones after your passing.
Remember, your loved ones will not know where to find your documents unless you tell them. Make sure you store your information in a safe place and then store the location of your information in the National Online Registry so your family can find it later.