A revocable living trust is a legal arrangement to hold ownership of your property throughout the course of your lifetime. The grantor is the creator of the trust and funds his trust with assets. Upon incapacitation or death, the successor trustee and the beneficiaries will receive the benefits of the trust. This living trust avoids probate which is a court-supervised process of dividing a person’s estate. A revocable living trust may be right for you if you would like to avoid probate for your trustee and beneficiaries. There are other scenarios where a revocable trust may be right for you which I will briefly discuss below.
What Does a Revocable Living Trust Do?
A revocable living trust is also sometimes called a living trust and it is a legal document created to hold ownership of an individual’s assets. This trust covers three phases of the trust maker’s life: his lifetime, possible incapacitation and what happens after death. The person who forms the trust is called the grantor or trust maker but also can serve as the trustee. In most cases, the trustee will form the trust to control and manage the assets he or she placed there until death. Trust makers may also choose to have an attorney or an institution act as a trustee but it is uncommon with this type of trust. A revocable trust is not necessarily permanent so you can change your mind and the trust will be “undone.”
This trust covers three phases of the trust maker’s life: his lifetime, possible incapacitation and what happens after death.
What Goes Into a Revocable Living Trust?
Thousands of people in California avoid having their estates go through the probate process because they choose to have a revocable living trust. This type of trust is more time and cost effective and it provides people control over their assets. Assets such as stocks, real estate, and bank accounts are all examples of what type of assets go into a revocable living trust. Who you are leaving your assets to should be created with a legal document with your living trust. Not only do you fund this trust with your assets but you also need to name an alternate trustee to manage your assets if you were unable to.
When Is a Revocable Living Trust Needed?
Transferring assets into a living trust can avoid time-consuming and costly court fees by preparing your estate for an easy transition after you die. You do not need to be wealthy to receive the benefits of a revocable living trust, but in some instances, it could be overkill. You can benefit from this type of trust if you own a business because your trustee can manage the business if you incapacitated or die. Also if you are concerned about privacy, a revocable living trust is a private document that doesn’t become a public court record. Only the successor trustees and the beneficiaries you have named may see a copy of your trust. When properly prepared, a living trust can provide for your spouse and children which may be important in second marriages. It saves estate taxes and can protect inheritances for children and grandchildren. If you can relate to any of these factors than you may need a revocable living trust.
Transferring assets into a living trust can avoid time-consuming and costly court fees by preparing your estate for an easy transition after you die.
What Happens to a Revocable Living Trust Upon Death?
Upon death, the successor trustee will step into your role as trustee or grantor of your trust. The beneficiaries you named in your trust documents will inherit from you and they will own the assets you placed in your trust according to the terms you decided when you made it. The assets you placed will not have to go through probate and your successor trustee will disburse your assets. The successor trustee must pay the taxes, debts, and costs of the trust operation from the assets you placed into it. If your successor trustee predeceases you, or if he or she dies before closing your trust, it’s possible your trust could be left unmanaged. States have their own laws on how to address these situations but generally, your heirs would have to have a successor trustee appointed by petitioning the court. Your beneficiaries have the right to suggest themselves or suggest their own choice.
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