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Trusts serve many purposes. They circumvent probate to pass assets to beneficiaries more quickly, some offer tax advantages or qualify you for healthcare benefits, and some allow you to take care of beloved pets or provide for disabled loved ones without consequences to their social security benefits. Trusts are either irrevocable or revocable.
Revocable trusts are created so that, in the grantor’s lifetime, they can be terminated, altered, or amended. The assets grantors can deposit are varied, from bank accounts and real estate to antiques and life insurance policies. Once the grantor dies, a revocable trust becomes irrevocable. If you are curious about how revocable life insurance trusts in Riverhead might benefit you, call our knowledgeable trusts attorneys at Tully Law Group, PC.
A grantor, through the trustee, can designate a revocable trust as the beneficiary or the owner and beneficiary of one or more life insurance policies on the grantor’s life. The owner, whether the grantor or trust, can also name the trust as the receiver of the policy proceeds, creating liquid funds for an estate to pay creditors, taxes, and expenses.
Because it is revocable, the trust can be amended at any time before the grantor dies. However, it does not minimize income or transfer taxes, nor does it separate the appreciation of assets in it from the grantor’s estate as an irrevocable trust does. A Riverhead attorney could explain the process of a revocable life insurance trust during a consultation meeting.
Funded revocable life insurance trusts (RLITs) hold other assets along with the policy, which is helpful in coordinating the disbursement of all assets at one time in Riverhead. Revocable trusts are generally set up to avoid probate, and any assets in the RLIT have that advantage.
Unfunded RLITs are more common and hold only the grantor’s life insurance policies or are named the beneficiary of them, receiving the proceeds and administering them according to trust instructions.
In Riverhead, revocable life insurance trusts are credible tools for small business owners who lack liquidity because they provide the cash for beneficiaries to keep running a business after the founder dies.
For instance, let’s say that a family’s deli is growing steadily but not generating a lot of extra cash after expenses. The parents and their two adult children operate the deli, and the family wants the children to continue the tradition after the parents die. However, the parents worry the children will have to sell the deli to pay taxes and creditors. The parents can adopt a revocable life insurance trust after purchasing their life insurance policies as assets for the trust. There could be a provision that the insurance proceeds will pay to settle the parents’ estates.
Along with providing the cash a family will need to continue to run a small business, RLITs:
Our attorneys sit down with clients and discuss all aspects of estate planning, including their ages, family status, degree of wealth, and goals. If a revocable life insurance trust is a tool that will benefit you, our Riverhead attorneys will explain in detail how and why.
A revocable life insurance trust can be adopted early in adulthood when you are building wealth but do not have much liquidity. It can provide for your family if something happens to you, giving you peace of mind that they are cared for despite your absence.
If you own a small and growing business, these trusts also help keep it in the family. You can add other assets to avoid probate and keep your personal business private since probate is public. You will not know if revocable life insurance trusts in Riverhead have advantages in your situation until you sit down with our attorneys and discuss them. Call our firm today.
