What Is A Revocable Living Trust?
A living trust is a trust that is created while an
individual (known as a “settlor” or “grantor”) is still living.
This declaration or agreement of trust includes names of
trustees, beneficiaries, describes investment assets and
properties held by the trust, and provides the terms of the
trust and how money is to be invested and distributed.
This trust arrangement allows one or more people to manage
or control property for someone else’s benefit. A living trust allows
an individual, while they are still living, to transfer the title of
their property to the trustee of the living trust. Once the transfer is
complete the trustee would then be the owner of the property.
So, as long as the trust is a revocable trust, the grantor or settlor
can be the trustee of his or her own trust.
Many times individuals do not understand the difference between
a last will and testament and a living trust since they both deal with
the distribution of property and assets. The first difference is that a
living trust can provide more privacy then a last will and testament.
The reason for this is that a living trust does not have to be submitted
to probate court(unless challenged). Therefore, the details of an estate
are more private. A last will and testament has to be submitted to
probate court, making it a public document. Another major difference is
that a living trust limits the involvement of probate court when distributing
property. However, many states are regulating such distributions
more and more.
There are many other benefits to creating a living trust. By creating a
living trust all assets including real estate can be managed and controlled
as a single unit. As a result, this allows for efficient distribution of assets
and property upon death. A living trust permits beneficiaries avoid the
probate process. The probate process in some states can be extremely
expensive and last for more than two years. Moreover, the probate process
can be more costly. Therefore, creating a living trust can be very cost
efficient when trying to avoid the probate process. In some states, assets
in a trust cannot be reached by a state’s estate recovery program where
assets passing under a will can be claimed.
In order to take full advantage of the benefits of a living trust property
must be transferred into the trust prior to death. The individual who transfers
the property is known as the “grantor”. The living trust that is created would
then be considered the “grantee”. It is important to transfer the most valuable
property into the living trust. This may include, a primary residence, business
real estate, money market accounts, stocks and bonds, valuable collections,
and expensive jewelry.
As previously stated, the creator of the living trust will name the beneficiaries.
There are three different types of living trusts beneficiaries. The three
types are specific beneficiaries, primary beneficiaries, and
alternate beneficiaries. Specific beneficiaries are the individuals who
receive specific property (such as a watch, clock, or piece of real estate).
Primary beneficiaries are individuals that receive any property that is not
explicitly distributed to the specific beneficiaries. Lastly, alternate
beneficiaries are individuals who receive any property in the event that
the primary beneficiaries died before the creator of the living trust.
Overall, the creator of the living trust is able to choose any person
they wish as beneficiaries of their living trust.
Lastly, a revocable living trust should be reviewed or altered if your
financial or life situation dramatically changes. This could mean
purchasing a business or a new piece of real estate. In accordance
with all other estate planning documents, a living trust should be
reviewed and updated every five to seven years.
For more information regarding revocable living trusts and
other estate planning documents please
contact David M. Frees, III at 888-573-7407.