The Revocable Living Trust
Summary: A revocable living trust is an indispensable tool in your estate planning kit. It can provide decisive control over your assets in the event of incapacity or death without the expense, delay, interference of a probate court and can give assurance that your disbursement plans will be carried out.
Do your eyes glaze over when someone mentions the word 'trust,' especially when modified by terms such as living, testamentary, revocable, irrevocable, and, of course, the bewildering inter vivos. Trust is a very common and well understood term, so it must be the modifiers that mystify. The act of trusting someone is the basis of a trust and we can start there. Trust simply conveys the idea that someone other than the owner of the assets is trusted to manage them. That individual is called the trustee and is legally held to the highest standards of ethics and accountability. All the modifying terms used in conjunction with ‘trust’ simply indicate and determine the relationship that the person who owned the assets has, or had, to the trust.
For example, irrevocable means that the trust assets have been permanently transferred to the trust. On the other hand, revocable means that the trust assets can be taken back by the person who transferred them to the trust. Testamentary indicates that the trust is created by a testator through his or her will; the terms living and inter vivos both indicate that the trust was established while the owner of the assets was living and competent. Putting this all together, a revocable living trust (RLT) is established during the lifetime of the owner of the trust assets and constructed so that the pre-trust owner has the ability to dissolve the trust and take back ownership of the trust assets.
You might wonder who owns the assets of a RLT? Very simply the trust itself owns the assets; mostly titled assets but can include untitled, because ownership is formally and legally transferred to the trust. The trustee does not own the trust assets but is the one held responsible for managing those assets for the benefit of the beneficiary.
You might also ask why bother? Because you naturally want to control your own property and an RLT maximizes that ability not only during life but also in the event of incapacity, death, and beyond death. Some of the points of control include:
1. Avoids the cost, delay, publicity, interference and contests common in probate;
2. Allows you to choose someone, a trustee (you), to manage the trust assets;
3. Allows you to choose successor trustees to manage the trust assets when the first named trustee (you) becomes incapacitated;
4. Allows you to set the criteria which, and even the persons who, will determine whether the trustee (you) is incapacitated;
5. Allows you to name the beneficiaries of the trust;
6. Allows you to set the amounts and timetable for distribution of trust assets to the beneficiaries;
7. Allows you to set up trust(s) for your children, or grandchildren, which can be funded at your death or incapacity and which can be managed by a trustee, named by you, until such time as you choose to distribute the assets, i.e. at majority or later;
8. Excellent tool for second marriage estate planning in order to guard against unintentional disinheritance of children of the first marriage. Can be established as part of a prenuptial agreement or separately.
RLT's are not without limitations and are not the answer to every estate planning problem. Nevertheless, an RLT is definitely worth considering because of its key benefits: its potential for providing you a great deal of control over your assets in a cost effective and efficient manner, during your life, through incapacity, and beyond the grave.
Article posted with keywords: revocable trust, trust, probate, will, estate plan