Revocable Living Trusts
Whether your loved one passed away with or without a will, his or her estate assets typically go through probate court. During this process, a personal representative is appointed to administer the estate. Only after all funeral and burial expenses, attorneys’ fees, and the decedent’s debts are paid will the beneficiaries receive their share of whatever remains in the estate.
Most people choose to create revocable living trusts to avoid the probate court process, which involves court supervision, court costs, and significant delays in administering a decedent’s estate.
Every probate estate is unique, but most involve the following steps:
- Filing a petition or application with the applicable probate court
- Notifying the interested parties and heirs of the decedent of the petition or application for probate
- Appointment of the personal representative or executor of the estate
- Notifying the decedent’s creditors (typically by publication) and reporting to the court the value of the estate
- Statutory payment of probate administration fees
- Distributing the estate assets to the beneficiaries
- Closing the estate and filing the appropriate documents with the probate court
Trusts are an arrangement where one party holds property on behalf of another party. Trusts are created by the person doing the estate planning (the grantor), who authorizes another person (the trustee) to manage the assets for the benefit of a third party (the beneficiaries). There are many reasons for establishing trusts, including creditor protection, tax minimization, and providing for the needs of underage beneficiaries.
If you do not fund your trust, then your trust document may be meaningless. For your trust to hold your assets, those assets must be retitled into the name of your trust, or your trust must be listed as a beneficiary of your assets (such as with your life insurance policy). Your assets will be owned by your trust only if it is properly funded.
If you do not fund your trust, then your trust document may be meaningless. For your trust to hold your assets, those assets must be retitled into the name of your trust, or your trust must be listed as a beneficiary of your assets (such as with your life insurance policy). Your assets will be owned by your trust only if it is properly funded.
Trusts are private documents and avoid probate court when properly funded. Wills, on the other hand, become public documents through the probate court process and do not avoid probate court. Unlike a will, which only allows you to distribute your assets to your beneficiaries outright after you pass away, a trust allows you to keep your assets in trust during your lifetime and to distribute assets to your beneficiaries when they are in need.
This structure enables your beneficiaries to maintain creditor protection against current or potential claims, such as divorce or lawsuits. A trust also allows you to distribute your assets to your beneficiaries at different ages or intervals, instead of keeping the assets in a lifetime trust.
A common misconception about trusts is that you only need one if you are wealthy. That is false. If you have minor children, you need a trust. If you want flexibility in how your assets are distributed, you need a trust. If you want to maintain privacy, you need a trust. If you want to lower estate, income, or other potential taxes, you need a trust. If you want creditor protection, you need a trust.
There are many benefits to having a trust.
This structure enables your beneficiaries to maintain creditor protection against current or potential claims, such as divorce or lawsuits. A trust also allows you to distribute your assets to your beneficiaries at different ages or intervals, instead of keeping the assets in a lifetime trust.
A common misconception about trusts is that you only need one if you are wealthy. That is false. If you have minor children, you need a trust. If you want flexibility in how your assets are distributed, you need a trust. If you want to maintain privacy, you need a trust. If you want to lower estate, income, or other potential taxes, you need a trust. If you want creditor protection, you need a trust.
There are many benefits to having a trust.
No. As the grantor (creator) of the trust, you retain full control and have the power to amend the trust at any time during your life, as long as you have the mental capacity to do so. A Revocable Living Trust is, by definition, revocable, and for that reason, you will not lose control over your property.