A common concern among estate planning clients is whether a certain planning tool will take away control of their property, during their lifetime. Basically, if a certain estate planning tool is irrevocable, then it cannot be changed. This means that once it is created and goes into effect, your control over the property affected by that instrument ends. If the tool is revocable, or able to be modified, then you still have control during your lifetime. Maintaining control with a living trust is very easy. Here is how it works.
How a living trust works
A revocable living trust is very similar to a will. It provides instructions on how to distribute your property to the people you want to inherit it. The difference is, with a trust, your property does not have to go through the probate process, upon your death. Because a living trust is revocable, you can cancel the trust at any time. It is a “living” trust because it is created while you are still living, as opposed to at the time of your death.
When you create a revocable living trust, you typically appoint yourself as trustee, retaining full power to manage the trust property. Ownership of the asset property is transferred to you, as trustee, allowing you to retain complete control over the trust property. This means you have the authority to sell, mortgage, or give away any property held in trust. You can return ownership of trust property to yourself, add property to the trust, change the trust beneficiaries, or revoke the trust completely.
Avoiding probate is one benefit of a living trust
Living trusts can save your family time and money by avoiding probate. Typically, a person’s property must go through probate, a lengthy court process, before that property can be distributed to the heirs. The cost of probate varies from one state to the next. On average, probate expenses equal approximately 5% of the estate. That is 5% that will not go to your family.
Probate can not only be expensive, but it also causes great delays. In most states, the probate process takes at least a year, during which time, your beneficiaries will not receive anything, except under very limited circumstances. Also, if you own real estate in another state, a separate probate proceeding in that state will be required. In many cases, where the types of property included in an estate are common (e.g., such as houses, bank accounts, vehicles) and there are no disputes between heirs, the property simply needs to be distributed. In light of this fact, avoiding probate seems the best thing to do. A living trust can make that possible.
Avoiding the need for a conservatorship or guardianship is another benefit
A living trust also proves useful if you ever become incapacitated for any reason. Incapacitation means simply being unable to take care of your own affairs, due to a physical or mental illness of injury. If you have a living trust, and you become incapacitated, the person you identified as the trustee to serve upon your death, can also take over management of your trust. The trustee has the authority to manage your property and use it for your benefit, while you are unable to do so.
Without a living trust, the court must appoint someone to serve as your conservator or guardian, typically a spouse or adult child.
If you have questions regarding living trusts, or any other estate planning needs, please contact the Schomer Law Group either online or by calling us at (301) 337-7696.