What types of assets do you own? If you have a bank account, life insurance, a 401(k), real estate, expensive jewelry, art, cars, boats, motorcycles, then a Revocable Living Trust will probably be required to avoid probate of your real estate.
Do you own a business? When it comes to a family business, this is where a Revocable Living Trust far exceeds the value of a Last Will and Testament. Why? Because by having your Revocable Living Trust hold your business interest, your successor trustee can continue to manage the business if you become incapacitated or die.
Do you want to include minor beneficiaries? If you want minor beneficiaries (individuals under the age of 18) to inherit some or even all of your estate, then you can set up a testamentary trust for their benefit in Revocable Living Trust.
Are you concerned about privacy? Once its filed for probate, a Last Will and Testament becomes a public record that anyone can read. Aside from this, the majority of probate court filings are public records that anyone can read, and these documents will list the names of your heirs and their addresses, what you owned when you died, and who you owed money to when you died.
On the other hand, a Revocable Living Trust is a private document that doesn’t become a public court record. This means that the only people who are entitled to see a copy of your trust after you die are the beneficiaries and successor Trustees that you have named in the trust agreement.
One of the main benefits of a Revocable Living Trust that’s often overlooked is the ability to build mental disability planning right into the trust. The trust can specify how your mental incapacity should be determined, how you should be taken care of if you do become disabled, and who will be able to manage your property as your Disability Trustee. This will keep you and your property outside of a court-supervised guardianship or conservatorship. Not all Revocable Living Trusts are created equally.
The difference between a revocable and irrevocable trust is as follows:
Revocable Living Trust – With a revocable living trust, you transfer your assets into the ownership of the trust. You retain control of those assets as the trustee of your revocable living trust. You can change or revoke the trust at any time you want.
Irrevocable Living Trust – An irrevocable trust allows you to permanently and irrevocably give away your assets during your lifetime. After you give away these assets, you have relinquished all control and interest in these assets.
A properly written and funded living trust can offer the following benefits:
- Avoids probate at death, including multiple probates if you own property in other states.
- Prevents court control of assets at incapacity.
- Brings all of your assets together under one plan.
- Provides maximum privacy.
- Quicker distribution of assets to beneficiaries.
- Assets can remain in trust until you want beneficiaries to inherit.
- Can reduce or eliminate estate taxes.
- Can be changed or cancelled at any time.
- Difficult to contest.
- Prevents court control of minors’ inheritances.
- Can protect dependents with special needs.
- Professional management with corporate trustee.
- Provides peace of mind.
Probate is a court-supervised process used to validate your will and distribute your property. The process takes anywhere from 6 months to over 2 years to complete, and may require that lawyers or other professionals be hired. Even if you die without a will, your estate must still pass through the probate system.
- Your will is filed with the probate court and becomes a public record.
- Your executor inventories your property.
- Your property is appraised.
- All debts, including death taxes, are paid.
- The court validates your will.
- Court costs, attorneys’ fees, and executors’ fees are paid from your estate.
- Then, and only then, the remaining of your estate is distributed to your loved ones.
A living trust is a legal document created by you (the grantor) during your lifetime that spells out exactly what your desires are with regard to your assets, your dependents, and your heirs. A living trust bypasses the costly and time-consuming process of probate, enabling your successor trustee to carry out your instructions as documented in your living trust.