When setting up an estate plan, many Oregon residents turn to revocable living trusts to hold funds for their beneficiaries. Revocable trusts have several notable features that you should consider when weighing your alternatives.
How revocable living trusts work
Trusts are created to hold someone’s assets and property. However, they are empty until the trust creator funds them and names a trustee for trust administration. The major difference between revocable and irrevocable living trusts is that the trustee still technically owns the assets in the trust, generally managing assets and acting as the trustee. An irrevocable trust requires the trust maker to step aside and name someone else as the trustee.
Revocable trusts allow you to change the trust’s terms, including assets placed into it, change beneficiaries, sell or use the assets or even put more assets in them. Revocable trusts use the trust maker’s Social Security number, while an irrevocable trust cannot be changed and has its own taxpayer identification number.
The Internal Revenue Service and probate courts view revocable living trusts differently. With a revocable trust, your beneficiaries will avoid probate after your death, but your heirs will have to pay estate taxes if your estate is over the designated amount.
Creating an estate plan
Creating an estate plan is an important consideration for all individuals, even those that don’t have a lot of wealth. Estate plans can help your beneficiaries avoid probate while also making life easier for you if you become incapacitated at any time.
Trusts are just one component of a good estate plan. Many different types of trusts are available, some of which can provide you with income during your lifetime. Carefully consider your needs before establishing your plan. You can change designations with a revocable living trust if your needs change.