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FIVE THINGS TO KNOW ABOUT A REVOCABLE TRUST

1. Avoiding Probate. A Revocable Trust is an estate planning tool that avoids probate. It is powerful enough to avoid probate for any and all assets in an estate. If you have a Revocable Trust there would be almost no reason to use the other, more limited, tools or techniques for avoiding probate.

2. It Has Limits. A Revocable Trust does not control life insurance policies, retirement plans and assets with payable on death designations. All of these arrangements supersede or trump the terms of a Revocable Trust. They automatically avoid probate. If you use a Revocable Trust to avoid probate, then you need to be careful about additional techniques because double dipping can do much more harm than good when it comes to avoiding probate.

3. Funding is Important. You must fund a Revocable Trust in order to make it work properly. In order to get all of the benefits of the Revocable Trust, you need to do a little bit of work. For a single person, this generally requires some changes to account statements, deeds and other documents so that the Revocable Trust is mentioned. Married couples have more options to fund their trust and the process can often be much easier. Funding generally is taken care of when the trust is created, although it is also a good idea to check on this every 5 years or so.

4. Not Asset Protection. A Revocable Trust is a tool to handle your estate after death. It does not protect or shelter assets from nursing home bills, long-term care expenses or other creditors that you encounter during your lifetime. Asset protection planning can involve the use of trusts, but those trusts are very different from the Revocable Trust used for estate planning.

5. I Need A Will Too? If you use a Revocable Trust to avoid probate it is very common to have a Will as well. This Will usually refers to the Revocable Trust, announces your intention to avoid probate and maintains your family's privacy. It is used to eliminate prior Wills that might contradict the Trust or cause confusion.

The Revocable Trust can give your family the best of both worlds: the organization, clarity and efficiency of a well-run estate without the delays, public record and paperwork of probate. It can also prevent the confusion, anxiety and disorganization that come with other probate-avoiding techniques.

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This is not legal advice or tax advice, pursuant to disclaimer.
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