Should you set up a Revocable Living Trust?
Here’s a quick guide to help you understand the Revocable Living Trust — what it is, how it works, and why it’s important for you to consider having one as the foundation of your estate planning.
Definition of Terms
Revocable Living Trust
A revocable living trust, also known as a revocable trust, living trust, inter vivos trust, or a grantor trust, is a written document that determines how your assets will be managed both during your lifetime and after you die.
The term “revocable” simply means that you can amend or revoke your trust at any time, as long as you are still competent.
A revocable living trust has three main parties: (1) the Grantor; (2) the Trustee; and (3) the Beneficiary.
When you create a revocable living trust, you are the grantor or the trust maker. This simply means that you are the person who created the trust.
The Trustee is the person or people, or the institution or business, that manages the trust assets or property for the beneficiaries of the trust. Most people name themselves as the trustee during their lifetime. This way, even though your assets have been put into the trust, you can remain in control of your assets.
You can also name a successor trustee (a person or a business or institution) who will manage the trust’s assets if you ever become unable to manage your property, or when you die.
Your trustee stands in a special relationship to the trust beneficiaries as a fiduciary. This means that he or she holds a position of trust and confidence. Your trustee is subject to strict responsibilities and very high standards in carrying out your specific wishes in your trust.
The trust beneficiary is the person or people who receive the benefit of the revocable living trust’s assets or property. This means that the trust’s property will either be distributed to them outright, or held in trust for their benefit. During your lifetime, you will likely be the main trust beneficiary.
If you become unable to manage your day-to-day affairs, you likely will continue to be the trust’s beneficiary. Once you die, other people, institutions, or charities may be the trust’s beneficiaries.
People often name their children or other family members or loved ones as trust beneficiaries. These beneficiaries ultimately will inherit the trust’s property when the trust maker dies. People also may name one or more charities to receive a portion of the trust’s property if the trust maker is charitably inclined.
How It Works
- Give the trustee the legal right to manage and control the assets held in your trust.
- Instruct the trustee to manage the trust’s assets for your benefit during your lifetime.
- Name the beneficiaries (persons or charitable organizations) who will receive your trust’s assets when you die.
- Give guidance, power and authority to the trustee to manage and distribute your trust’s assets. For example, the trustee cannot use your trust’s assets for his or her own personal use or benefit without your explicit permission. Instead, the trustee must hold and use trust assets solely for the benefit of the trust’s beneficiaries.
Advantages and Benefits
You can make amendments to your trust at your own discretion. This can prove invaluable if your circumstances change or if you’re unsure about who you want to name as your beneficiaries. The flexibility of a revocable trust is the reason why it’s a popular option for people in planning their estate and is one of the main tools most people use in their estate planning.
Your appointed trustee has a fiduciary duty to act in your best interest. So if you become incapacitated, your trustee can take over and manage your affairs. This happens automatically. You do not need to go through court proceedings or appointed conservators for your named successor trustee to take over management of your trust’s property.
Not only is the probate process time-consuming and needlessly expensive, it also exposes your assets and estate to public scrutiny. The costs of going through probate will have an impact on what your beneficiaries will inherit. With revocable living trusts, probate is not necessary. Your trustee will be able to distribute your assets to your beneficiaries without a court order.
Basic wills often cause disagreements among family members and other beneficiaries. A Revocable Living Trust can help eliminate challenges to your Will and ensure your beneficiaries actually receive what you want them to receive, saving more time and money.
As your wealth accumulates, so too will the assets in your revocable living trust.
At Crider Law Group, we can design a Revocable Living Trust capable of meeting your goals now and anticipating potential issues in the future.