Key Provisions To Include In Your Revocable Living Trust

A revocable living trust is a versatile estate planning tool that allows individuals to manage and protect their assets during their lifetime while ensuring a smooth transition of those assets upon death. One of the key features of a revocable living trust is that it can be modified or revoked entirely at any time by the grantor, as long as they are mentally competent.

Here is a livestream video that I made where I walked viewers through an actual Louisiana living trust instrument.

Below, we'll explore some of the key provisions typically included in a revocable living trust.

1. Settlor, Trustee, and Beneficiary Designations

• Settlor: The person who creates the trust and contributes their assets to it. The settlor retains control over the assets in the trust during their lifetime.
• Trustee: The individual or institution responsible for managing the trust assets according to the trust's terms. Often, the settlor serves as the initial trustee, with a successor trustee named to take over if the settlor becomes incapacitated or dies.
• Beneficiaries: The individuals or entities who will receive the assets in the trust. The trust document specifies how and when the beneficiaries will receive their inheritance.

2. Revocation and Amendment Clause

• This provision gives the settlor the right to revoke or amend the trust at any time. It ensures that the settlor retains flexibility in managing their estate plan and can make changes as needed due to changes in circumstances, relationships, or preferences.

3. Disability or Incapacity Provisions

• This section outlines how the trust will be managed if the settlor becomes incapacitated. It typically names a successor trustee who will step in to manage the trust assets if the settlor is unable to do so. This provision is crucial for ensuring the settlor's affairs are handled without court intervention in the event of incapacity.

4. Distribution Provisions

• These provisions specify how the trust assets will be distributed upon the settlor’s death. The settlor can outline specific distributions to beneficiaries, such as lump-sum payments or staggered distributions over time. They can also include conditions for distribution, such as the beneficiary reaching a certain age or achieving certain milestones.

5. Spendthrift Clause

• A spendthrift provision protects the trust assets from creditors of the beneficiaries. It prevents beneficiaries from assigning their interest in the trust to creditors and shields the assets from being used to pay off debts, thus safeguarding the inheritance.

6. No-Contest Clause

• This provision is designed to discourage beneficiaries from challenging the trust. If a beneficiary contests the trust and loses, they may forfeit their inheritance or receive a reduced amount. This can help prevent family disputes and ensure that the grantor's wishes are carried out as intended.

7. Successor Trustee Provisions

• This section names one or more successor trustees who will take over the management of the trust if the initial trustee is unable to serve. The settlor can specify the order of succession and include instructions for how a new trustee should be selected if necessary.

8. Trustee Powers

• The trust document typically includes a list of powers granted to the trustee. These may include the power to buy, sell, or lease property; make investments; distribute income and principal; and perform other necessary actions to manage the trust. These powers are intended to ensure that the trustee can effectively manage the trust assets in the best interests of the beneficiaries.

9. Tax Provisions

• Depending on the settlor’s situation, the trust may include specific tax provisions to minimize estate taxes or income taxes. These might involve instructions for the payment of taxes or the establishment of separate trusts (such as a bypass trust) to take advantage of tax exemptions.

10. Trust Termination

• This provision outlines the circumstances under which the trust will terminate. Typically, a revocable living trust will terminate upon the final distribution of assets to the beneficiaries. The settlor can also include instructions for early termination if certain conditions are met.

Conclusion

A revocable living trust is a powerful estate planning tool that offers flexibility and control over your assets during your lifetime and provides for an orderly transition upon death. Including well-drafted provisions in the trust document is essential to ensure that your wishes are carried out, your beneficiaries are protected, and your estate is managed efficiently. By carefully considering each of these provisions, you can create a trust that meets your unique needs and provides peace of mind for you and your loved ones.