Probate, a legal process that outlines your assets and their distribution upon death, can be avoided using a living trust. Probation can be expensive and time-consuming. You may also hear these terms: trust-maker, trustee, and grantor. These all refer to the same person.
What is a Revocable Living Trust?
One tool that enables someone to create an estate plan is a revocable living trust. It will allow a grantor to appoint a successor trustee to manage assets and distribute them according to the terms of the Trust. The trustee can also add new beneficiaries or remove them. It is an excellent feature for people who want to control their estate while alive. One significant advantage of this type of Trust is that it avoids probate. Probate is a legal process that verifies a will, pays any debts, and distributes property to beneficiaries. It can be a lengthy and expensive process, and it exposes your personal information to the public. A revocable living trust in California can bypass probate by transferring your assets to the Trust while you are still alive.
However, the trustees of a revocable living trust have powers similar to those in a probate proceeding, so some costs may be involved with avoiding probate. In addition, the assets in a revocable living trust are still subject to taxes. It includes income tax, which creditors can access and count against Medicaid eligibility.
To take advantage of a revocable living trust, you must gather all your assets and retitle them into the name of the Trust. This process is known as “funding” the Trust, and it will include retitling stock and bank accounts and re-deeding real estate.
Why Make a Revocable Living Trust?
The main reason to make a living trust is to avoid probate costs, delays, and publicity. Probate is a court process that distributes your assets according to the stipulations of your will or, if you don’t have a will, state law. In addition, Trust may help protect your privacy. Unlike choices, which become public records, trusts are private documents. Using a revocable trust also allows you to manage your assets while living in the event of incapacitation. However, it would help if you transferred the ownership of all of your assets to the Trust to take advantage of this benefit. It would also help to name a trustee to manage the Trust. While many call themselves trustees, appointing someone you trust to manage your assets is best. A trustee has legal authority to spend, invest, or dispose of the Trust’s assets but only by the terms of your revocable living trust.
Although revocable trusts can be used to minimize estate taxes, they do not protect from creditors. Because the assets remain your personal property, revocable living trusts do not offer the same level of protection from creditors that irrevocable trusts do. As a result, it’s essential to include both a will and revocable Trust in your estate plan.
How Do I Make a Revocable Living Trust?
Any competent adult can create a revocable living trust. It typically includes a written agreement or declaration establishing the Trust and naming yourself as a trustee. It would help if you also named a successor trustee who will take over after your death. The trustee will follow the instructions specified in the trust document in managing and administering the Trust’s assets. While alive, you can add or remove property from the Trust anytime. Following your passing, the trustee will distribute your estate to your beneficiaries in line with the directives in your will. It avoids probate, which can be costly and time-consuming.
It is important to note that revocable living trusts are not a substitute for wills. You must still create a Will to dispose of any assets you do not transfer into the Trust and designate an executor and guardian for minor children.
Another benefit of revocable living trusts is saving money on estate tax and other expenses. Your taxable estate does not include the assets held in the Trust. However, the Trust’s assets can still be accessed by creditors and may count against you for Medicaid means testing. A knowledgeable revocable living trust lawyer can help you decide whether this type of estate planning instrument suits your family’s situation.
What Are the Benefits of Making a Revocable Living Trust?
There are a variety of reasons why individuals seek to establish a living trust. One of the most often cited is that a living trust, or inter vivos Trust, will allow assets held within it to bypass probate. The New Jersey probate process is not particularly lengthy or expensive. Still, the ability to avoid the time and expense of settling an estate through the courts is attractive to many people. A living trust will also allow for the speedy transfer of your assets to beneficiaries after you are gone. It is possible because a will must go through the probate process to be legally binding, whereas a trust can be distributed according to its stipulations immediately after your death.
Furthermore, a living trust may be more cost-effective than a will because it will allow you to save on costs associated with settling an estate through probate, including legal fees and expenses for professional trustees. An estate planning lawyer can provide insight regarding how a trust may be structured to minimize taxes and other costs. However, it is essential to note that assets placed in a living trust will not be protected from the grantor’s creditors while alive (though irrevocable trusts may offer such protection). A will still need to be established to establish guardianship for minor children and to address specific issues after death, including estate tax planning.