What is a Revocable Living Trust?
A trust created while a person is still alive is called a Living Trust. The Living Trust is created when one person, a Grantor, places property into the trust. The property is held by a Trustee in the name of the trust and managed by the Trustee for the benefit of a Beneficiary. You (the Grantor) can be the Trustee and Beneficiary of your own Living Trust, and retain management control over your own property.
What are the benefits of a Revocable Living Trust over a Last Will (probate court)?
Probate court will mean additional expenses, delay, and loss of privacy. A Revocable Living Trust should help you avoid many of the expenses and delay of Probate Court. Your beneficiaries will usually have unrestricted and uninterrupted access to income and assets after your death as long as you do not have significant unresolved debts. Note also that Probate Court is a public record with a resulting loss of privacy. In addition a Revocable Living Trust can be set up to smoothly manage your affairs in case of temporary disability.
What are the drawbacks of a Revocable Living Trust?
A Living Trust can be more trouble to set up and maintain or modify. Title to all property must be individually transferred to the trust including land, accounts and securities. You will probably still need a simple Last Will to distribute any remaining possessions or cash not contained in your Living Trust.
How does a Revocable Living Trust work?
When a trust is created, a Trustee must be appointed to manage the trust. With a Revocable Living Trust, you (the Grantor) are almost always the Trustee as well as the initial Beneficiary as long as you are alive. When you (the Grantor/Trustee) die, then the duties and obligations of managing the trust shift to the Successor Trustee. At the time of your death the trust is no longer revocable and the terms of the trust can no longer be changed.
If I set up a Living Trust can I be my own trustee?
Yes. In fact it is very common for a grantor to act as their own trustee. One of the benefits of a Living Trust is that the grantor can retain control over their own property for the rest of their lives. You must however designate a Successor Trustee who will take over management of your Living Trust after you die.
So if I create a Living Trust then I don’t have to worry about probate?
Not true. Any property that you do not transfer to your trust will still be subject to probate. You must ensure that you have transferred as much property as possible into your Living Trust including bank accounts, investment accounts, real estate, and business interests. If you have substantial debts and obligations then probate may also be advisable to limit creditor rights, and limit the time that your Revocable Living Trust can be challenged. Probate may also be required to establish homestead status for your primary residence.
Are there other ways to avoid probate?
There are other ways to avoid the expense and delay of probate. By holding property jointly (with rights of survivorship) with your spouse or partner the surviving spouse or partner simply assumes full title to joint property on your death. In addition, in the case of life insurance policies and retirement accounts, assets may be directly transferred without probate by naming specific beneficiaries in the policy. You may also avoid probate by simply making a gift of property before your death. However, you cannot do this for the purpose of hiding assets or avoiding debts as a court may find this to be a fraudulent conveyance and may reverse or void the gift.
Will beneficiaries have instant access to my assets and property after my death?
No. The trustee must first ensure that all legally enforceable debts and obligations of the grantor are resolved. Only then can the trustees make a final distribution of the trust assets and property.