Living Revocable Trust: A General Guide

A living revocable trust is a legal document that authorizes you to transfer the right of your assets to a trust during your lifetime. This type of trust is "revocable" because you can modify or cancel it all while still alive. In addition, a living revocable trust can be a valuable instrument for managing assets and distributing wealth after your demise.

Essential Aspects of a Living Revocable Trust

A living revocable trust, commonly known as inter vivos or revocable living trust, is a lawful document that lets you transfer ownership of your assets to a trust while you are still alive. The trust is controlled by a trustee, who can be yourself, a family member, or a professional trustee such as a trust company or an attorney. In addition, you can name yourself the trustee and continue to oversee your assets during your lifetime. It implies you possess control over your assets and can change the trust as you see fit.

Moreover, to set up a living revocable trust, you must create a trust document outlining the trust terms. The trust document should include information about the assets you are transferring to the trust, the beneficiaries of the trust, and the trustee who will manage the trust. The requirements for creating a trust vary from state to state, but in most states a trust will be valid if you sign the trust document in front of a notary public and have it witnessed by two people. It’s important to consult with an attorney when creating a trust to ensure that it is properly executed according to the laws of your jurisdiction.

Once the trust is established, you must transfer ownership of your assets to the trust. It can include real estate, bank accounts, investments, and personal property. You will need to change the ownership of these assets to the name of the trust, and you may need to re-title some assets, such as real estate, to reflect the trust ownership.

Besides, during your lifetime, you will continue to oversee the assets in the trust as the trustee. You can modify the trust document, add or remove assets from the trust, and distribute principal or income as you see fit. After your death, the trustee will disperse the assets in the trust according to the trust document's provisions. It can include distributing assets to inheritors, making charitable contributions, or holding assets in trust for future years.

Advantages of Setting Up a Living Revocable Trust

Below are some key advantages of setting up a revocable trust.

• Avoiding Probate. One of the principal advantages of a living revocable trust is that it can assist you in avoiding probate. In addition, probate is the legal procedure of distributing your assets after your demise. This method can be expensive, time-consuming, and stressful for your loved ones. By transferring your assets to a trust, you can avoid probate altogether. Moreover, your assets will be distributed according to your wishes, as summarized in your trust, without court involvement when you pass away.
• Safeguarding Your Privacy. Another advantage of a living revocable trust is that it can help protect your privacy. When you die, your will becomes a matter of public record. Anyone can access it and learn about your assets and how they are distributed. With a living revocable trust, your assets are distributed privately without court involvement. It can help protect your family's privacy and prevent them from being targeted by scammers or identity thieves.
• Reducing Estate Taxes. A living revocable trust can also help reduce estate taxes. When you transfer your assets to a trust, they are no longer part of your estate for tax purposes. It means that your estate may be subject to lower taxes, which can help preserve more of your assets for your beneficiaries.
• Maintaining Control of Your Assets. A living revocable trust allows you to keep control of your assets. You can transfer your assets to the trust but still manage them as you see fit. You can buy or sell assets, change the beneficiaries of your trust, and even terminate the trust if you wish. This level of control can be essential if you want to ensure that your assets are distributed according to your wishes.
• Facilitating Charitable Giving. Ultimately, a living revocable trust can facilitate charitable giving. You can use the trust to make charitable donations during your lifetime or after your death. It can be a great way to support causes that are important to you and leave a lasting legacy.

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How to Create a Living Revocable Trust

Unlike a will, which becomes effective only after you pass away, a living revocable trust is effective immediately, and you can revoke or change it at any time. Below are the steps involved in creating a living revocable trust.

1. Decide If a Living Revocable Trust Is Right for You. The primary step in making a living revocable trust is to decide if it's the right option for you. A living trust can be the right choice if you have substantial assets or want to avoid the probate process. It can also provide privacy and flexibility for your estate planning. Nevertheless, a living trust may be unnecessary if you have a small estate or are satisfied with the probate process. Also, if you have complicated estate planning needs, a living trust may not be adequate to address all your problems.
2. Select a Trustee. The trustee is the individual or entity accountable for managing the assets in the trust. You can decide to be the trustee of your living trust or select someone else to serve as the trustee. If you prefer someone else, ensure it's someone you trust with the ability and expertise to handle your assets.
3. Determine the Assets You Want to Place in the Trust. To make a living trust, you must transfer ownership of your assets to the trust. It generally includes your investments, real estate, and bank accounts. You'll need to make a trust document summarizing the specific assets you want to include.
4. Make the Trust Document. The trust document is a legal document that summarizes the terms of the trust. It includes details about the trust's beneficiaries, trustees, and assets. You can create the trust document yourself or hire an attorney to prepare it.
5. Finance the Trust. Once you've made the trust document, you'll need to transfer ownership of the assets to the trust. It generally involves re-titling assets in the name of the trust. For instance, if you have a bank account, you'll need to change the ownership from your name to the name of the trust.
6. Edit Your Estate Planning Documents. Creating a living trust may require revising your estate planning documents, such as your power of attorney and will, depending on their terms and your estate planning goals. You'll need to ensure these documents are consistent with the terms of the trust.
7. Check and Update the Trust as Needed. A living revocable trust can be modified or revoked at any time. Reviewing the trust is important to ensure it still meets your needs. If you need to make changes, you can amend the trust document.

Key Terms for Living Revocable Trusts

• Trustee: The individual or entity accountable for managing and distributing the trust assets.
• Beneficiary: The person or entity who will receive the trust assets or benefits from the trust.
• Probate: The legal process of distributing a person's assets after death.
• Funding: The process of moving assets into the trust.
• Revocable: A living revocable trust can be changed or terminated by the trustor during their lifetime.

Final Thoughts on Living Revocable Trusts

A living revocable trust is a prevalent estate planning tool that can help people manage their assets during their lifetime and after their demise. By creating trust, people can avoid probate, maintain privacy, and ensure their assets are distributed according to their wishes. A living revocable trust is a flexible tool that can be changed or terminated during the trustor's lifetime, allowing for modifications as circumstances change.

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