A Revocable Living Trust is an alternative to a will, is the cornerstone of most estate plans. You transfer your property from yourself, as trustor, to yourself as trustee. No one else is involved with your trust while you are living. You can buy, sell, trade, invest, and reinvest property without obtaining consent from any other party. In your trust document, you name who will be successor trustee and successor beneficiaries. Upon your death, the successor trustees distribute the estate to the successor beneficiaries exactly as you have directed in your trust. This can be accomplished through gifts, percentages, or a combination of both.
There are several common misconceptions about Revocable Livings Trusts, including:
- Only the wealthy need to have trusts
- Trusts are too complex for people
There are cases where advanced estate planning is necessary. This is typically for wealthy people who need to create particularly complex vehicles to make sure they minimize estate taxes. The simple reality is that essentially everyone should have a trust. In fact, if you have a family, especially with young children, and/or you own a home, it could be irresponsible not to have one. In addition to other benefits of having a trust should you be incapacitated, trusts are not overseen by a probate court, unlike a will.
It is true that trusts are a bit more complicated than a will, which can be handwritten on a napkin, with guidance from an experienced estate planning attorney, they can be easy to set up, and maintain. For instance, a will does not need to be funded, but a trust does. Funded, basically refers to transferring necessary assets to the trust. A brand new trust is like an empty bucket. If something were to pass away and your living trust were empty, your beneficiaries may inadvertently be left empty handed.
A revocable living trust is not to be confused with a “testamentary trust,” which is included in a will. Because “testamentary trusts” they are part of a will, they must be probated and could be subject to statutory and attorney fees.