A Last Will and Testament will likely serve as the foundation of your estate plan; however, a well thought out and comprehensive estate plan should include additional estate planning tools and strategies as well. One common addition to an estate plan is a revocable trust. The best way to decide if a revocable trust should be included in your estate plan is to discuss your options with your North Dakota estate planning attorney. In the meantime, however, consider the following three common reasons why you might want to consider including North Dakota revocable trusts in your estate plan.
Trust Basics
First, it helps to learn a few trust basics. At its most basic, a trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, who transfers property to a Trustee. The trustee holds that property for the trust’s beneficiaries. Trusts are broadly divided into two categories – testamentary and living trusts. A testamentary trust does not active until the death of the Settlor whereas a living trust becomes active as soon as all of the formalities of creation are complete. Living trusts are then further sub-divided into revocable and irrevocable living trusts. As the names suggest, a revocable living trust can be modified or revoked by the Settlor at any time and for any reason whereas an irrevocable living trust cannot be modified or changed by the Settlor once the trust activates. A testamentary trust is always revocable because it doesn’t activate until the death of the Settlor. Therefore, North Dakota revocable trusts can be either testamentary trusts or living trusts.
Reasons to Consider North Dakota Revocable Trusts
You may decide to include a revocable trust in your estate plan for a wide variety of reasons; however, the following are some of the most common reasons why people choose to include a revocable trust in their estate plan:
- Flexibility – one simple reason why revocable trusts have become such a popular addition to a well thought out estate plan in recent years is the fact that they are so flexible. As the Settlor, you create the trust terms. As long as those terms are not illegal or unconscionable you may include any terms you wish in your revocable trust. This makes a revocable trust a very flexible estate planning tool that can help you achieve a virtually endless number of estate planning goals.
- Control – when you gift assets to someone in a Last Will and Testament, the beneficiary can do whatever he or she wishes with the assets once the gift is complete. The beneficiary could completely squander the gift and there would be nothing you, or anyone, could do about it. Understandably, you likely want to avoid this possibility. A trust helps you do just that by providing a certain amount of continued control over assets transferred into the trust. Because you create the trust terms, you can decide when distributions from the trust are made, how much the distributions will be, and even what the trust assets can be used for if you wish. You could, for example, only allow trust assets to be used to pay expenses related to higher education or medical treatment.
- Children – if you are the parent of a minor child, a revocable trust allows you to ensure that the assets you leave behind for your child are protected and well managed until the child reaches the age of majority. Because a minor cannot inherit directly from your estate, someone must have control of any gifts you leave behind for your child. When you use a revocable trust, you appoint a Trustee who will manage and control those assets. Unlike a direct gift, however, the Trustee is legally bound to invest the assets using the “prudent investor” standard and always have the beneficiary’s best interests in mind when managing the trust assets. Moreover, the Trustee is also bound by any specific terms you included in the trust with regard to when and how to distribute the trust assets to your child after he or she is old enough to inherit the assets.
Contact Us
If you have additional questions about North Dakota revocable trusts, contact the experienced estate planning attorneys at Thompson Law by calling 701-738-0060 to schedule an appointment.
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