If you are like many Americans, you may assume that trust funds are only for the very wealthy. However, even if you have only a modest estate, a trust can be an important financial planning tool that ensures your assets transfer more easily to loved ones after your death.
For middle-class families, a revocable trust often makes the most sense. This type of trust allows you to create a trust whose terms you can later change or revoke.
How does a revocable trust work?
You may fund a revocable trust with assets like bank accounts, life insurance or investments as well as vehicles or personal items. When you create the trust, you designate a trustee to manage assets in the fund and you may give instructions for how property in the trust should distribute to beneficiaries after you die. You may also act as trustee yourself.
Why create a revocable trust?
One of the biggest advantages of a revocable trust is that assets in the trust do not have to pass through probate after you die. Probate can be an expensive and lengthy legal process. By transferring assets through a revocable trust, you may be able to minimize the financial impact on your estate and ensure your heirs receive property more quickly.
Many families also choose revocable trusts because they are flexible and adaptable. As the name suggests, you may remove assets or change the terms of the trust, including who you name as trustees or beneficiaries, whenever you choose.