The revocable living trust is one of the most easily managed of the trusts I’ve mentioned. For one thing, you can serve as both trustee and beneficiary of the revocable trust you create. You retain control over every asset you transfer to your trust. All you have done is changed hats from "individual" owner to "trustee" owner/manager, but you still own and manage these assets.

Once you transfer your assets to your trust, they avoid probate at your death. Probate isn’t the monster some people make it out to be, but it is still costly and time-consuming, especially if you own property out of state which requires an ancillary or second probate.

One of the primary benefits of a trust is that if you become ill or incapacitated, your successor trustee will be able to assume control of the trust assets immediately without the need for court intervention. This transition of "managers" is usually quite seamless and is available whether you die or are just temporarily or permanently incapacitated.

Now another hindrance has been removed, making living trusts even less problem to manage. Because living trusts have become an increasingly popular estate planning tool, the Federal Deposit Insurance Corporation (FDIC) decided to change the insurance rules for living trust accounts. This decision was made because the existing rules had been confusing for both consumers and bankers alike. The FDIC Board of Directors voted on January 13, 2004, to simplify the insurance rules for deposits held on behalf of revocable living trusts.

For purposes of the new rules, the definition of a revocable trust is unchanged. It is simply any type of revocable trust that enables the owner (grantor or settlor) to retain full control over the assets and the designation of beneficiaries during the owner’s lifetime.

With the new rules, the FDIC went even further than it had to in protecting the investments of trust depositors. First, it pointed out that many revocable living trusts contain qualifying conditions. That is, a trust will state that assets will only pass to specified beneficiaries if certain conditions are met, such as when the beneficiary reaches a certain age or if he marries or graduates from college. Conditions such as these are often known as defeating contingencies because they can be roadblocks to a beneficiary receiving his or her inheritance.

Under the new rules, the FDIC clearly favors the depositor. Unlike the current rules, the new rules do not limit FDIC insurance coverage if there are such defeating contingencies in the trust agreements. This is important because if a bank fails, the FDIC provides insurance coverage of up to $100,000.00 for each qualifying beneficiary entitled to assets in the living trust account upon the death of the account owner. A qualifying beneficiary is defined as the account owner’s spouse, children, grandchildren, parents and siblings. Under the old rules, if there was a defeating contingency, the beneficiary wasn’t considered "qualified." With the new rules, if a living trust account is owned by Dad and he lists his three children as beneficiaries, the account is eligible for $300,000 of FDIC insurance coverage even if the living trust document contains "defeating contingencies."

The new rules also deleted the requirement that beneficiaries of living trust accounts be named in the records of the depository institutions. The FDIC agreed with customers that this requirement was "overly burdensome and unnecessary," especially since living trust account holders may change the beneficiaries of their trusts at any time.

While the changes to the FDIC rules may seem relatively minor, their effect could be significant. By removing cumbersome reporting requirements and ignoring the presence of restrictive contingency language, far more depositors will receive the full measure of FDIC insurance protection for their accounts.

If you already have a revocable living trust and maintain an account in the trust’s name, these changes will work to your benefit. If you don’t currently have a trust, but you are thinking about establishing one (because you own land in more than one state, you have an ongoing farm or business, or you and your spouse have been married before and have children from your prior marriages), these changes might be just the catalyst you needed to help you decide to complete your estate planning.

The key to good estate planning is planning ahead, knowing what you want, and working with qualified professionals who can show you the best way to get there.