A key benefit of a Revocable Living Trust is to control the ages at which your children receive their inheritance. Without a trust, sons and daughters as young as 18 years of age receive full distribution of their inheritance in Minnesota once your estate is settled.
Alternatively, a trust allows you to establish in advance the age or ages that your children must attain before inheriting your assets. Typically parents state that the trustee of the trust is to use trust assets to provide for their children’s basic needs – phrased as “health, education, maintenance and support” regardless of the child’s age. For any assets that remain beyond satisfaction of each child’s basic needs, you may pre-select the age or ages that your children must attain before receiving the remainder of any trust assets. The remainder of those assets can be – but need not be — distributed all at once. For example, parents could let a child inherit one-third (1/3) of the remaining principal at age 30, half of the remainder at age 35 and the rest at age 40.
By stair-stepping the inheritance, you are providing your children with some protection. If a child makes a foolish mistake with his or her initial distribution from the trust principal, there is still other principal remaining for them.
Trusts are also flexible. You pick the trustee, and you can include language in your trust that gives that trustee some discretion based on your family circumstances and your desires. It’s hard for you to predict what troubles your children may encounter in the future. Creditor issues? Drug issues? A difficult marriage? You can help your children even when you are no longer living by giving your trustee a certain amount of discretion regarding the distribution of trust assets to your children. While the assets are held in trust, in Minnesota those assets typically are not subject to creditor claims and the claims of divorcing spouses.
Ownership of real estate – regardless of value – tends to trigger probate at your death regardless of the state where you lived and died. If you own a home in Minnesota and a cabin in Wisconsin, for example, your estate will likely face probate in both states before the real estate can be transferred to your heirs or other designated beneficiaries.
However, any real estate owned by your Revocable Living Trust may avoid probate. Thus, your Minnesota home and your Wisconsin cabin could be owned by your Minnesota Revocable Living Trust – avoiding probate on either property in either state. (Joint ownership of the real estate at the time of your death may also avoid probate related to the real estate. Some states, including Minnesota, also allow Transfer on Death Deeds that may avoid probate.)
Probate is time-consuming and public. When your assets are instead held in a trust, the trustee follows the instructions in your trust document without court intervention.
These are just some of the advantages of having a Revocable Living Trust whether or not you are wealthy. Consult with an estate planning lawyer to explain your concerns related to your assets, and to explore your options.
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