Revocable Living Trust


What is a Living Trust?
A living trust, or “inter-vivos” trust, is an estate planning mechanism that enables you to have your property transferred to, and managed by a trust during your lifetime. And, because it is revocable, you can change it at any time depending on you’re your circumstance. After your death, the trust becomes irrevocable and all of its provisions must be carried out by a trustee who is designated by you.

The key advantages of a revocable living trust:

  • Keeps your assets out of probate: The assets owned by your trust are passed directly to your heirs including charities, thereby avoiding the delays and costs of probate court.  This is especially important if you own real estate or other property in more than one estate. 

  • Keeps your affairs private: What goes into your trust stays with your trust, at least as far as your private financial matters. Your will is a matter of public record, but a trust is not.

  • The trust can distribute trust assets immediately at death or can be perpetual, distributing trust assets over time as outlined in the trust.  Trust distributions can be a percentage of the trust, specific bequests, or a combination of both.  

  • The trust can have multiple beneficiaries including charities.  Also, if a primary beneficiary is not living at the time of your death, this beneficiary's share can go to named successor beneficiaries for this specific beneficiary.   The trust can continue to manage the assets for this beneficiary.

    • For example, the trust leaves one-third of the trust assets to a child who is not living at your death.  In this instance, if addressed in the trust, this child's share would go to his/her children and the trust can continue to manage and distribute assets based on your wishes.  If the children are minors, the trust can distribute income and/or assets as needed while still minors, pay for specific expenses such as college, and ultimately distribute the assets at specified ages in the future.

  • You can arrange for a trustee to manage its assets even after your death in order to maintain the continuity of income from a business, rental property or another asset.  The trustee or successor trustee can also manage the trust on your behalf if you should become incompetent.

  • When a trustee, including a grantor who is also a trustee, is no longer able to perform the duties, the trust can designate successors trustees who can step in immediately.

Revocable Living Trust Basics

Parties to the Trust: A trust includes a grantor (you), a trustee (you, your spouse, both you and your spouse or anyone you designate), and a beneficiary (typically your surviving family, other heirs, charities or a combination of all.

Establishing the Trust: A living trust can be set up fairly quickly. It usually requires an attorney to draft and authenticate the trust which is a legal document that specifies all of the grantor’s terms, names a trustee and beneficiary and then lists all of the trust’s assets. After the grantor and the trustee sign the trust, the title of selected properties and assets can be changed to the trust as owner.

The Life of a Trust
A revocable living trust is a living document that can be changed or revoked by the grantor at any time during his or her life. So, if changes in marital status or other family relationship occur, they can be reflected in the trust. Assets and properties can be added or removed. Trustee designations can be changed.

Your living trust should be reviewed periodically because, after the death of the grantor, it will become irrevocable (if the grantor includes both spouses, it continues as a revocable living trust).

You Still Need a Will
The living trust is the mechanism for distributing your property, however, you still need a will in order to execute the trust. The trust is the primary beneficiary of your will. The added benefit of having a will is that, for any property or assets that might have been excluded from the trust, the will acts as a “catch-all” to ensure that all property is distributed according to your wishes.

Additionally, if you need to designate a guardian for dependent relatives, you need a will, because there is no place in a trust to establish guardianship.

No matter how large your estate, if you have any concerns with the distribution of your assets, you should consider a revocable living trust. It is recommended that you seek the services of an estate attorney in drafting your trust as well as for periodic reviews.  An independent fee based professional financial planner will be able to help you thru the entire process and ongoing follow-up.  

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.