These tips on estate planning using a trust came from Choice Mom-friendly lawyer Chris Tymchuck:

A trust is actually a very simple tool. The name "revocable living trust" tells you everything you need to know about the instrument. The term revocable simply means that you have the ability to revoke - or terminate - it at any time prior to death. This means that if your circumstances change or you become
uncomfortable with your trust you may terminate it. The term "living" means that it is a trust you created during your lifetime as opposed to a trust that is to be created upon your death via your will.

The trust document merely sets forth the terms that govern your trust. The document is generally quite long as it covers how you would like things managed now, if you are incapacitated, after your death and, at times, at the death of the next generation. Put simply, the trust names a trustee who manages the trust and the beneficiary who is to receive the benefit of the trust assets.

When your revocable living trust is set up you will be named as the trustee and the beneficiary of the trust so that you may manage the assets for yourself. After that you decide who will be the trustee and beneficiary of your trust upon your death.

There are many benefits to having a trust but this post will only explain the financial benefits. As a parent of a minor child, there are three simple reasons you should consider including a revocable living trust in your estate plan.

Reason #1: Protecting Assets for Your Minor Children
If you leave money or other assets directly to a minor child through a will or as a beneficiary designation you have essentially asked the State to create a trust for that child. The trust is created under the Uniform Transfer to Minors Act ("UTMA"). In Minnesota, for example, law governs the way in which your children may receive money under an UTMA trust. Assets left to children will be paid to them, in full,
when they reach the age of 21. This means that there will no longer be anyone who may assist with the management of those assets once your child turns 21.

Here’s when a trust becomes a vital part of your estate plan by allowing you to leave your assets to a child while simultaneously protecting them. A trust typically provides that the child’s inheritance will be held in trust for the child’s benefit and managed by a more experienced trustee. You may specify in the trust document the age at which your child would be entitled to receive distributions from the trust.

While a child’s inheritance is held in trust, the trustee is authorized to use the trust funds for the child’s benefit, including paying for the child’s education, helping the child to buy a house or start a business, or for any other reason that you have specified. Holding assets in trust for a young child will protect the child from making unwise decisions and may also offer protection from a child’s creditors.

Reason #2: Minimize the Time and Expense of Settling Your Estate by Avoiding Probate
A probate proceeding is required to transfer ownership of your assets after death. Please know that a will does not avoid probate. Your will merely provides instructions to the probate court on where you would like your assets to go. In Minnesota, for example, the minimum amount of time required to complete the probate process is nine months provided there are no complications. The cost of probate varies greatly depending on a number of factors such as size and complexity of the estate and disputes with creditors or family members.

Common expenses of distributing an estate include attorneys fees, accounting fees, court fees, appraisal costs and executors fees. In Minnesota, these fees generally add up to 2% to 7% of the total estate value or about $4,000 for a small estate and over $10,000 for a larger one. Other states have much higher probate fees. For instance, in California probate costs are governed by statute and cost 4% of the total estate. So, probate of a $100,000 estate is $4,000 and for a $1 million estate the fee is $23,000. That means an attorney, instead of your children, will get 4% of your estate.

Assets held in a revocable living trust will not be subject to the probate process. If your trust is properly drafted and title to your assets properly transferred to the trust, your heirs may altogether avoid probate. Further, an attorney can draft a revocable living trust for less than the cost of probate. Please take matters into your own hands and spend a little money now to ensure that you maximize the amount of money your kids get later.

Reason #3: Protect Your Children from Creditors and Predators
My single-parent clients have one main concern upon contacting me: to protect their children in the event of a tragedy. You may also be concerned with keeping your assets in the family until your child is grown or reaches a specific milestone such as college or marriage.

Further, as noted above, money left directly to a child will be held in an UTMA trust until the age of 21. Upon reaching 21 all of those assets will be paid directly to your child and creditors can attach them as they can any other property owned by your kids.

A trust offers an effective way to protect your assets for the future use and benefit of your children. Creditors cannot force a trustee to make a distribution to the trust beneficiaries, thus the assets held in a trust can remain outside the reach of the beneficiaries' creditors as long as they are held by the trust. This means that, in most states, assets remaining in a trust are protected from creditors with only a few exceptions such as child support payments or claims of fraud.

When my clients hear the word creditor or predator they generally think of Visa or Madoff. But, a creditor or predator may also be a future spouse in a divorce or an ex with whom they jointly own property. Both of these people could become creditors and any part of your child’s inheritance not protected by a trust may be subject to attachment.

This post only mentions a few of the financial advantages of having a revocable living trust. Other advantages that are beyond the scope of this post include incapacity planning, estate tax savings and efficient charitable planning. If any of this discussion strikes home, please contact an attorney in your area to discuss the proper use of a trust in your estate plan.