Everyone needs a simple way to pass assets on to their children. When your will gets tied up in probate, asset distribution can take months. However, if you have a revocable living trust in place, assets can go to your heirs in a matter of a couple of weeks. The process is extremely simplified for your children and grandchildren. A living trust also allows your estate to avoid probate in multiple states and provides some privacy.
What is a revocable living trust?
A revocable living trust is a legal instrument through which a living person transfers ownership of property and other assets into a trust for the benefit of himself or herself during their life and his or her beneficiaries after death.
In deciding whether or not to use a revocable living trust you should consider three factors:
- Do you have property in multiple states
- Are you concerned about privacy
- Do you want to incorporate disability planning
The primary reason most people establish a revocable living trust is to safeguard their estate (and family) from having to disclose their assets during probate. If your estate goes through probate, your assets will be a matter of public record.
In establishing a revocable living trust, most people name themselves as their trustee and appoint their primary beneficiary (spouse or adult child) as a successor trustee. Upon the trustee’s death, the assets in the trust go directly to the successor trustee without a break in the trust’s continuity.
A revocable living trust can also help with managing your property and with care of your property if you become disabled.
As a caution, if you divorce the trust does not automatically revoke. You will need to be sure and change your trust to recognize a new successor trustee.
What is an irrevocable trust?
Some people choose to make their trust irrevocable in order to save additional money on taxes and to avoid creditor liability. This demands extensive paperwork and you lose a lot of control over your assets. It is not a move to be entertained by most people.
Setting up a revocable living trust
The truth is, if you work with a competent lawyer, establishing an individualized revocable living trust is straightforward. He or she will handle all the document development. Before you meet with your attorney, be sure to ask what documents you should bring to the appointment. During your meeting with the attorney, you will want to go through each of your assets to determine which should be added to the revocable living trust. Also, after going over your assets, ask your attorney if a revocable living trust will save you money. As a general rule of thumb, the greater the value of your assets, the greater your need for a revocable living trust.
Three things to do after setting up your revocable living trust
Fund your trust
It is imperative that once you take the step of establishing your revocable living trust that you take the essential next step and fund the trust. This means transferring titles of assets to the trustee and making the trust their owner. You’ll need to reregister title documents and perhaps prepare and sign a new deed to your home designating the trust as owner. Your lawyer, or the office’s paralegal, can help you with this process.
Write it down
Make sure you keep a written record of the specific assets and account numbers in your trust. Providing such a record will make the job of your successor trustee much more manageable.
Establish a “pour over” and power of attorney
You will also need to establish a pour over will that upon your death transfers remaining assets not included into your trust. Your attorney will also help you arrange for durable power of attorney, if you wish. This gives your designee the authority to fund the trust and transfer assets for your care if you become incapacitated.
Contact the estate planning attorneys at Robinson & Henry for knowledgeable advice on establishing a revocable living trust, writing a will or developing an estate plan. You can reach us for a no cost, no obligation consultation at 303-688-0944.