A revocable living trust is a popular Estate Planning tool, mainly to avoid probate. The trust instrument is a written document created by the grantor (also commonly referred to as the settlor) during lifetime and is effective upon signing. This trust holds the grantor’s assets and property for the benefit of the grantor. All assets the grantor wishes to use to fund the trust are transferred to its trustee. The trustee will determine how the assets are invested or used for the benefit of the trust’s beneficiary. Most often with this type of trust, the grantor is also the trustee and beneficiary of the trust. A revocable living trust may be appropriate for your estate plan; for instance if you own out-of-state property. However, it may also be unnecessary and indeed, inappropriate.
How Is a Revocable Living Trust Created?
It is relatively simple to create a revocable living trust if it is an appropriate tool as part of your estate plan. Your elder law attorney will prepare the trust agreement, which is executed by the grantor and the trustee. The grantor must then transfer title of all assets that will become legally owned by the trustee of the trust, which are held for the benefit of the beneficiary named in the trust. Again, the grantor, trustee, and beneficiary may all be the same person; however legal title of the property in the trust is in the name of the trustee only.
Can a Revocable Living Trust Be Changed?
Yes. A revocable living trust can be amended or revoked during your lifetime, and this power is memorialized in the trust language. You might wish to have your elder law attorney revise your trust when you experience certain life changes, such as marriage, divorce, the birth of children or grandchildren or should you or another beneficiary become disabled. Often people acquire more personal wealth as they age, and this is another reason to work with your elder law attorney to examine the living trust’s continued effectiveness for your estate. Once the grantor passes, the trust becomes irrevocable, and no additional changes can be made.
Can I Avoid Probate with a Revocable Living Trust?
MAYBE. Avoiding probate is one of the reasons many people believe they should establish a revocable living trust. If you have a revocable living trust when you die, your successor trustee administers the trust and will distribute its assets according to your wishes as memorialized in the trust. However, if ALL of your assets are not titled in the name of the trust, the Personal Representative named in your Will may need to administer the probate process as well. Furthermore, certain assets cannot be titled in a revocable living trust, such as IRAs, and other retirement accounts.
I Have a Revocable Living Trust. Do I Need a Will?
Yes. Why? Because many people establish but do not effectively fund or maintain their revocable living trusts. Not uncommonly assets are left out of the trust so upon the death of the grantor, there also must be a probate to “pour over” the probate assets into the trust.
I Have a Revocable Living Trust. Will it Protect My Assets?
Maybe, but probably not. If you are the grantor, trustee and beneficiary, you have full control over your assets so creditors may be able to access the trust assets. Also in some states, like Washington, you cannot protect assets for your spouse if you use a revocable living trust and your spouse needs Long-Term Care. Instead a different type of trust, a testamentary special needs trust, must be used so that the assets do not interfere with government benefits, like Medicaid Long-Term Care. In other words, your Will must create that special trust. A revocable living trust cannot.
A consultation with an elder law attorney can help you determine what is best for your particular circumstances in managing your personal wealth now and your estate when you pass. Please contact us today to learn more!