Trusts Law

Revocable Trust

Imagine you worked hard to collect some valuable things. You want to give them to your loved ones when you die. But you want the transition to be smooth and private. So, you put your things into a garage. When you die, someone you trust takes your items out of the garage. They then give them to your family the way you want. That’s how a revocable trust works, except that the garage is imaginary. It’s a written legal agreement.

This article explains revocable trusts. Trusts are subject to state and local laws. Since these laws vary, you should contact an estate planning attorney in your area. An estate planning attorney with experience in creating trusts will understand the laws in your state. They can also give you legal advice about your situation.

What Is a Revocable Trust?

A trust is a legal agreement where someone manages trust assets for a third person’s benefit. The trust creator is the grantor or settlor. The person who manages the trust property is the trustee. The beneficiary is the person who benefits from the trust.

The trustee is a fiduciary. A fiduciary must act in someone else’s best interest. In the case of the trust, the trustee is the fiduciary of the beneficiaries of the trust. The trustee must manage the trust assets according to the terms of the trust agreement.

The following are common assets people put in trusts:

  • Real estate
  • Cash
  • Investments
  • Life insurance policies

Trusts can do many things. These are the most common:

  • Charitable giving
  • Asset protection
  • Managing assets for minors or people with special needs
  • Tax benefits
  • Estate planning

A revocable trust is a type of trust you can change after you create it. For example, you can change beneficiaries. You can also add or remove property from the trust.

You don’t get any tax benefits or asset protection with a revocable trust. You should consider an irrevocable trust if those are your goals.

The revocable living trust (RLT) is an estate planning tool that replaces the will in your estate plan. An RLT is like a will in that you can direct who gets your assets after you die. But an RLT offers more privacy than a will and avoids probate.

Probate is the legal process of closing an estate. The probate process can be expensive and time-consuming. Your heirs must probate your estate if you die with probate assets in your estate. By putting your assets in the name of the trust, you won’t own anything needing probate.

Probate court proceedings are public record. So anyone can see who’s inheriting your property. Trust administration happens outside of the probate court. This means the identities of your heirs are private.

How Does a Revocable Living Trust Work?

Your RLT includes instructions for distributing the trust property after you die. The recipients of your property are the trust beneficiaries. Beneficiaries are usually family members, friends, or charities.

One difference between revocable and irrevocable trusts is who serves as the trustee. In an irrevocable trust, you’ll make a third party the trustee. But in a revocable trust, most people name themselves the trustee. So, you control the trust property even though the trust owns it.

You’ll also pick a successor trustee. The successor trustee manages your trust during your incapacity and after you die. When you die, your trust becomes irrevocable. Your successor trustee will distribute the trust property according to your instructions.

How Do I Set up a Revocable Trust?

You must create a revocable trust according to state law. You also must fund it. Otherwise, you won’t get the trust’s benefits. An estate planning attorney can correctly create and fund your trust.

Your first step in creating a revocable trust is to decide who your successor trustee and beneficiaries are. Your successor trustee can be an individual or a professional trustee. It should be someone you trust.

The next step is drafting the trust document. The trust document contains instructions for how you want your property distributed after you die. For example, you can directly give the trust property to the beneficiary. Or you can have the property put into a new trust created for the beneficiary.

The last step is putting your property in the trust. This process is trust funding. It’s an important step. If you don’t put your assets in the trust, you may own probate assets when you die. That means your estate will go through probate.

Contact an Estate Planning Lawyer for Help With Your Case

Revocable trusts are an effective way to pass your property to your loved ones. But it must be valid and funded for it to work. Contact an experienced estate planning attorney for help. They can ensure your trust is correct and meets your needs.

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