By William Harlow, J.D. and Julia Dean, J.D.
The Revocable Living Trust has become popular in recent years because it allows for incapacity protection and a private transfer of assets to your children. The Revocable Living Trust may also allow you to afford a level of creditor protection, divorce protection, and estate tax protection for your kids.
There may come a point in your life when you are no longer have the capacity to manage your financial affairs, whether it be because of age, illness, mental disorder, or another cause. In those instances, your loved ones, oftentimes your children, will have to step-in to take care of your finances. This is often a very stressful time for your children, and having a plan to allow them to have access to your accounts when you are incapacitated is invaluable.
One way of allowing your kids to have access to your finances during your incapacity is through a durable power of attorney. One drawback to this approach is that the financial institution may not honor the power of attorney and a court-ordered guardianship may be required to get access to the funds. Another drawback is that when you pass away, your power of attorney is no longer effective, and your kids will lose access to your finances until a probate judge issues Letters Testamentary.
Once Letters Testamentary are issued, your child, as your Executor, will have access to your accounts to pay any outstanding medical or burial expenses. However, your child will have to proceed through the court-overseen probate process before they are able to inherit your assets.
Alternatively, if your accounts are properly funded into a Revocable Living Trust, your child, as your Trustee, may manage your finances during your incapacity, as well as after you pass away, without any court involvement. Further, there is no court approval necessary to gain access to your finances. Compared to the first approach, this approach is streamlined and privatized.
You may also choose to leave your children’s inheritance in a trust for their benefit. By leaving your children’s inheritance in a trust, you are giving them use and control of the assets without giving them legal ownership of the assets. This allows the assets you leave your children to be insulated from your children’s creditors and liability. Because your children would not legally own the assets, they would also not be subject to division if a child were to get divorced.
Creating a Revocable Living Trust can give you and your children peace of mind during stressful times, such as incapacity and death, by providing a streamlined approach to the administration of your estate. Further, you can help to provide liability and divorce protection for your loved ones. If you are interested in creating a revocable living trust, call us at (281) 277-3326 to have a complimentary estate planning consultation with an experienced estate planning attorney.
William Harlow is an Associate Attorney at The Dean Law Firm, PLLC, a boutique law firm in Sugar Land, focusing in the areas of Estate Planning, Probate, Guardianships and Elder Law. Julia Dean, its Managing Attorney, has been named a Lawyer of Distinction and has received numerous awards recognizing her as a Top Attorney in Estate Planning. The Dean Law Firm, PLLC has been voted Reader’s Choice for Attorneys in Fort Bend with Living Magazine many years and also received multiple awards for outstanding client service. The Dean Law Firm is committed to bringing you peace of mind by providing thoughtful and strategic planning for your family.