Revocable Living Trust
Is My Trust Plan Fool Proof?
A Revocable Living Trust is a legal document that, like a Will, specifies 1) Who will inherit your assets; and 2) Who will be in charge of disbursing those assets. The revocable living trust simply replaces a Will as your core estate plan document. Unlike a Will, however, a living trust can avoid probate at death, control all of your assets, and provide certain protections for your assets if you become incapacitated while you are alive.
The terms of your revocable living trust can be designed and tailored to meet your personal objectives. If you want to delay a distribution to a beneficiary until a certain age, you can. If you want to protect assets from a second (or third) marriage mate if your spouse survives you, you can. If you want to keep that undesirable in-law from getting your child’s inheritance, you can. If you want to minimize or potentially eliminate death taxes, you can. If you want keep from disrupting your disabled child’s government benefits, you can. These terms, and so much more, can be written into your revocable living trust.
After you have established the living trust, you re-title your assets into the trust’s name so that you no longer own those assets in your individual name. Regardless of changing the ownership on your assets, you retain full authority to manage, use and direct the control over those assets as trustee of your trust. This allows probate avoidance for any assets held by your trust; affords ease of transfer or distribution of the trust assets without court involvement; and retains privacy. While you are alive, since this is your trust holding your assets, you are the beneficiary of those assets until your death.
The term “revocable” means any instructions you design in the trust, including the ultimate distribution of your assets or the management of the trust assets, can be changed during your lifetime at anytime you wish. In other words, any and all provisions of your trust, including the trust itself, may be changed or done away with so long as you have the mental capacity to make these changes.
Revocable Living Trusts, like probate, requires an administration of the assets within the trust. Each process, both probate and trust administration, requires three (3) distinct steps:
1. Gathering, identifying and valuing estate assets
2. Satisfying creditor claims and paying final taxes where applicable
3. Distributing the balance of the estate assets to the beneficiaries or trusts for the beneficiaries’ benefit.
The primary difference between probate and trust administration is that the administration of a trust is a private matter, not open to public court process.
A specialized Will known as a pour-over Will should accompany a Revocable Living Trust in almost all estate plans. The pour-over Will acts as a safety net. So, if you fail to have an asset within your living trust when you die, the asset will go through probate under your pour-over Will. After probate, the asset will be “poured over” into the living trust for its final distribution.