What Is A Revocable Living Trust?
A living trust is a trust that is created while an individual (known as a “settlor” or “grantor”) is still living. This declaration or agreement of trust includes names of trustees, beneficiaries, describes investment assets and properties held by the trust, and provides the terms of the trust and how money is to be invested and distributed. This trust arrangement allows one or more people to manage or control property for someone else’s benefit. A living trust allows an individual, while they are still living, to transfer the title of their property to the trustee of the living trust. Once the transfer is complete the trustee would then be the owner of the property.
So, as long as the trust is a revocable trust, the grantor or settlor can be the trustee of his or her own trust.
Many times individuals do not understand the difference between a last will and testament and a living trust since they both deal with the distribution of property and assets. The first difference is that a living trust can provide more privacy then a last will and testament. The reason for this is that a living trust does not have to be submitted to probate court(unless challenged). Therefore, the details of an estate are more private. A last will and testament has to be submitted to probate court, making it a public document. Another major difference is that a living trust limits the involvement of probate court when distributing or making such distributions
more and more.
There are many other benefits to creating a living trust. By creating a living trust all assets including real estate can be managed and controlled as a single unit. As a result, this allows for efficient distribution of assets and property upon death. A living trust permits beneficiaries avoid the probate process. The probate process in some states can be extremely expensive and last for more than two years. Moreover, the probate process can be more costly. Therefore, creating a living trust can be very cost efficient when trying to avoid the probate process. In some states, assets in a trust cannot be reached by a state’s estate recovery program where
assets passing under a will can be claimed.
In order to take full advantage of the benefits of a living trust property must be transferred into the trust prior to death. The individual who transfers the property is known as the “grantor”. The living trust that is created would then be considered the “grantee”. It is important to transfer the most valuable property into the living trust. This may include, a primary residence, business real estate, money market accounts, stocks and bonds, valuable collections, and expensive jewelry.
As previously stated, the creator of the living trust will name the beneficiaries. There are three different types of living trusts beneficiaries. The three types are specific beneficiaries, primary beneficiaries, and alternate beneficiaries. Specific beneficiaries are the individuals who receive specific property (such as a watch, clock, or piece of real estate). Primary beneficiaries are individuals that receive any property that is not explicitly distributed to the specific beneficiaries. Lastly, alternate beneficiaries are individuals who receive any property in the event that the primary beneficiaries died before the creator of the living trust. Overall, the creator of the living trust is able to choose any person they wish as beneficiaries of their living trust.
Lastly, a revocable living trust should be reviewed or altered if your financial or life situation dramatically changes. This could mean purchasing a business or a new piece of real estate. In accordance with all other estate planning documents, a living trust should be reviewed and updated every five to seven years.
Please click the links, for more information regarding last wills and testament and living trusts.
For more information regarding revocable living trusts and other estate planning documents please contact our office at 610-933-8069.
