Flying Solo? Consider a Revocable Trust

2 Consider a Standby Trust Header ImageIf you’re flying solo, whether in retirement or earlier in life, you might have encountered a particular estate planning quandary: who will manage your affairs if you become incapacitated?

One possible solution that many people aren’t aware of is the standby trust. These trusts are, like the name implies, always on standby: they don’t get funded or activated until they become needed – such as in cases of illness or disability.

Here’s how it works, and how to start the process of assessing whether a standby trust might be right for you.

Standby trust basics

Standby trusts are, relatively speaking, simple to prepare and put into place.

You may be able to create one within your will or as part of a living trust document (click here to learn more about legacy planning). Your trust document, which defines the trust, will lay out your wishes for how your assets will be managed, and your attorney will likely ask you for a listing of assets to eventually include in the trust assets.

After that, the trust simply waits on the back-burner: it isn’t officially formed until – and unless – certain conditions are met, such as your incapacity. At that point, your assets fund the trust, and your appointed trustee can manage the assets on your behalf. A trustee operates much like the executor of an estate (the same person can typically serve in both roles), only in this case it’s a more open-ended job, lasting until their services are no longer required.

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A trustee should be:

  • An individual adult or entity
  • Free of mental disability
  • Generally speaking, not a beneficiary of your estate, though each situation is different

A trustee might be directed to perform activities like:

  • Making sure your bills are paid and taxes filed
  • Monitoring your investments and making investment decisions
  • Making decisions about spending and income based on your needs

2 Consider a Standby Trust Info ImageThe great thing about having this process formalized is that you can provide clear directions about how you want your money managed, rather than simply relying on your trustee’s best judgment.

You can also fully empower your trustee to act on your behalf. With more casual arrangements, or even with powers of attorney, your representative could encounter costly headaches and delays while attempting to prove that they have your permission to make decisions.

Finally, with a standby trust you have the benefit of fiduciary obligation: your trustee is required by law to act in your best interest, which in many cases is enough to help individual trustees stay on track on behalf of their loved ones.

When can I use it?

Your trust will automatically go into effect if one of the conditions for its use arise. But if you set up a standby trust and become incapacitated and then recover, your assets will simply revert back to your control and your trustee will step aside until he or she is needed again.

You can also change the terms of your standby trust throughout your life, depending on your preferences, evolving relationships, or other needs.

It’s also possible to have your standby trust continue after your death, allowing any outside assets to become part of the trust, to be administered by your trustee.

Considerations

 It’s always a good idea to consult with a qualified estate attorney before setting up any kind of trust. That way, you can get advice that’s tailored to your personal needs and the particulars of your financial planning situation.

But for many individuals, a standby trust is an option worth considering thanks to its convenience, flexibility, and scope.

Flying solo into retirement?

Solo retirees often don’t feel any different than any other retiree, but there are certain financial planning considerations that individuals should take into account on the retirement planning journey. Download our free guide to navigating the unique financial risk factors you might be facing and get ready to take off with confidence.

Download A Solo Flight Into Retirement for free today!

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We can discuss this topic and more at a complimentary appointment. As a bay area retirement planning coaches, we can give you a review and make suggestions based on your retirement objectives.

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Important Disclosures

The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by United Planners.

To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. Neither diversification nor asset allocation can ensure a profit or prevention of loss in times of declining values. United Planners does not render tax advice.

Securities and advisory services offered through United Planners Financial Services, member FINRA, SIPC. Pasquale Vitucci, CA Insurance Lic. # 0758212, is an Endorsed Agent of Vitucci & Associates Insurance Services CA Insurance Lic. # 0I06319. Vitucci & Associates Insurance Services and United Planners are separate and unrelated companies.
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Further Reading

Revocable Trust basics:
https://www.newkirk.com/pdf_forms/PlanningBooklets/Plan2-6WM.pdf

https://law.freeadvice.com/estate_planning/trusts/standby-trust.htm

https://info.legalzoom.com/contingent-trust-trustee-22534.html

https://gstrustco.com/blog/2012/06/07/standby-trusts/