With a Revocable Living Trust, you can fund assets in the trust and take out of the trust during your lifetime. You can also invest trust assets and change the terms of the trust whenever you want. But what happens when you pass away and your assets need to be distributed to your loved ones? Below, we explain how assets are distributed to beneficiaries from a Revocable Living Trust after the Trustmaker dies.
After the Trustmaker passes away, the assets that are designated to the spouse are allocated to a Survivor’s Trust and are considered property of the surviving spouse. The spouse has unlimited access to all of the assets in the Survivor’s Trust and can also change the beneficiaries if they want to choose someone different.
Any assets that are “disclaimed” by the surviving spouse will be held in a Family Trust until the surviving spouse passes away. The surviving spouse can collect income and principal for their suitable health, education, maintenance, and support.
If parents aren’t worried about their children spending their inheritance or whether creditors will come after them, then they can give an outright distribution of all the trust assets the children are entitled to.
Parents can also use a Staged Distribution strategy if they believe their children are too young or aren’t financially savvy enough to handle an outright distribution of their inheritance. With a Staged Distribution, the inheritance is distributed once the children reach a certain age.
If parents are worried about protecting their children from lawsuits, divorce, and creditors, they can use a Lifetime Asset Protection Trust. This type of trust is designed to promote smart investment and expenditure habits throughout the child’s lifetime.
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