For most people, a Last Will and Testament is the first choice for passing on their assets to their heirs. But it’s not the only choice. Among other estate planning tools, the Revocable Living Trust is gaining in popularity, especially for individuals seeking to avoid probate and avoid the delays of Surrogate’s Court.
Whether a living revocable trust is right for you depends on your circumstances. Here are a few important things you should know about Living Trusts:
What is a Revocable Living Trust?
A trust involves three parties: (i) you, the creator (also known as settlor or donor); (ii) the trustee or trustees, who agree to manage your assets as directed by the terms of the trust (can be you while you are alive); and (iii) the beneficiaries, who are the individuals that will gain from your Trust.
A revocable living trust is a written agreement setting forth the rules of the Trust. It typically designates someone to be responsible for managing the property. The instrument is called a living trust because it’s established while you are alive. It’s “revocable” because, as long as you’re mentally competent, you can amend or dissolve the trust at any time at your own discretion for any reason. Typically, a living trust becomes irrevocable (cannot be changed) when you die.
In order to maintain full control over the assets inside of the Trust, you will want to be the Trustee. As trustee, you will have the power to manage and invest your assets and distribute them how you see fit.
What is the Difference between a Trust and a Last Will and Testament?
Although both a Will and a Trust serve as instruction manuals for distributing your assets, a trust takes effect immediately while a Will only takes effect at death.
People who want to avoid probate, streamline management of assets, maintain privacy, or who intend to make unequal distributions of their assets among their beneficiaries may want to have a Living Trust instead of a Will. There are also additional advantages to revocable trusts.
It may also be more difficult to contest the validity of a Trust than a Will so individuals who may want to disinherit certain family members or treat their family members or beneficiaries differently may prefer a Trust to a Will.
What if I Don’t have Either a Will or a Trust?
If you don’t leave valid instructions for the disposition of your assets, then your property will pass by intestacy, pursuant to the rules set forth in Estates Powers and Trusts Law 4-1.1. In general, your assets will pass to your spouse and to your children, equally. This may not be what you may want.
Most people want their assets to pass to their spouse first, and then, upon the death of their spouse, to their children. In order to make sure that assets pass in the way in which you want them to pass, you must have either a Will or a Living Trust.
What Does a Trust Do for Me?
A living trust provides you with peace of mind. It also eliminates the need for your estate to pass through probate.
Your trust can be written in a way that will pass your assets to your beneficiaries immediately upon your death. Alternatively, you can create sub-trusts within your trust and designate that your asset be distributed out over time and in amounts that you specify.
Who are the Trustees of my Living Trust?
Typically, because a Living Trust is a Will substitute, and because you want to maintain full control of your assets, you will be the Trustee of your living trust. You can designate who you want to become the trustee if you are incapacitated.
Typically you would designate your spouse and/or children as successor Trustees in the event of your death. You could also designate your accountant, financial advisor, friend, or, if you have significant assets, a Trust company.
Do I have to Fund my Living Trust?
Although it is not necessary to fund the Trust, in order for the instrument to avoid probate, you either need to designate the Trust as the beneficiary of your assets or change ownership of your assets to the Trust.
The decision of whether to designate the Trust as beneficiary or change ownership depends on the asset and your specific situation. Therefore, it is important to speak with your estate attorney about how and when to fund the Trust.
Does a Living Trust Require a lot of Additional Work and Cost?
Not necessarily. Once the Trust is set up and the funding done and you have an understanding of how the process works, then any other assets you acquire can be acquired through the Trust. You can just designate the Trust as the owner of any of your new assets.
Do I need an Attorney to prepare a Living Trust?
Although you can theoretically use one of online services, if you want to make sure that your Trust is properly structured and achieves your goals, then you may want to consult with an attorney to establish the Trust.
You don’t want to be your own doctor so don’t be your own lawyer.
How Much Does it Cost to Set up a Living Trust?
The price depends on the facts and circumstances, the complexity and size of the assets and the geographic area. The fee could be as little as a few hundred dollars, but more typically runs several thousand or more. Contact us to discuss your specific needs.
So – Is a Revocable Living Trust for me?
A Living Trust can be for you. It all depends on your facts and circumstances. We can help you structure the appropriate estate plan to fit your needs. Please feel free to contact us today.
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