A revocable living trust is a written agreement designating someone to be responsible for managing your property; it’s called a living trust because it’s established while you’re alive. It’s “revocable” because, as long as you’re mentally competent, you can change or dissolve the trust at any time at your own discretion for any reason.
Typically, a living trust becomes irrevocable (cannot be changed) when you die.
With a living trust, your assets (your home, bank accounts and stocks, for example) are put into the trust, administered for your benefit during your lifetime, and then transferred to your beneficiaries when you die.
Most people name themselves as the trustee in charge of managing their trust’s assets. This way, even though your assets have been put into the trust, you can remain in control of your assets during your lifetime.
You can also name a successor trustee (a person or an institution) who will manage the trust’s assets if you ever become unable or unwilling to do so yourself.
Who should have a Living Trust and Why? – You get to choose!
There are a handful of reasons most individuals and couples ought to consider living trusts, but for the vast majority the bottom line can be summed up in two words: probate avoidance.
AVOID PROBATE!! -Less Lawyers, Less Court, Usually much less Cost
Probate can cost between 5% to 8% of your estate; While being probated all of your assets are frozen- putting a time delay from a few weeks to much longer- sometimes years when things go really wrong.
A Trust allows you and your family to bypass the Probate process. However, not everyone needs a Trust. If you own a piece of Real Property or Real Estate then a trust can be very beneficial. A piece of real estate is usually a ticket to Probate Court.
People who own a piece of real estate- this type of asset is subject to probate.
Real estate in more than one state? – Can get you a ticket to Probate Court in two separate states.- that’s twice the money, lawyers and court- ewwww!
People with minor children- don’t leave it up to a court that doesn’t know you or your family to decide what is best for your children- you decide.
People who have Disabled (or spendthrift) children? – Hypo- a client has a $100,000 estate and one 20 year old son as the only dependent. Do you want to have a $100,000 check cut for the 20 year…. Or should we put some restrictions on the money so that there may still be some left when he turns 21?
Incapacitation- Something that is often overlooked. Anyone who has ever dealt with a loved one who has Alzheimer’s disease or other debilitating illness can tell you how difficult it can be with a loved one who loses their capacity. A trust can become effective at the point of incapacitation.
People who would like to keep their assets private- probate process, your executor will probably have to file an inventory of your assets and their approximate values, and this filing, along with your will, is a public record that anyone can look at. A living trust does not have to do this.
To better protect your assets from creditors and lawsuits; Keep Things Private
As required by state law, probate is a public proceeding. This means that anyone can go to the court house and take a look at each and every probate file being stored there.
For example, if I’ve been hired by the beneficiary of an estate that’s already been opened, then I can just go down to the court house and take a look at the probate file. The court clerk will not ask me why I need to look at the file, and I can even request the clerk to make copies of specific documents or the entire file. In fact, in some jurisdictions you can look up court dockets and filings online. It is all a public record.
Business information, assets, debts, creditors- all public information. – All open to the public.
There are unscrupulous individuals out there that would love to know that certain members of your family just came into a large sum of money. In this day and age of identity theft and internet fraud we need to diligently protect our information so keep it private.
Contrast this with a Revocable Living Trust – it doesn’t need to be filed with a the court, so it won’t become a public record for everyone to see, while anyone can read a Last Will and Testament that’s been admitted to probate.