Probably the most commonly used estate planning tool is the will. Yet, there are so many other choices available. Among them is the revocable living trust, which is beginning to gain popularity. Not only are living trusts a good way to avoid the lengthy probate process, but living trusts provide other advantages, both before and after death. What you need to know about living trusts is that they are very useful estate planning tools.
The definition of a revocable living trust
A revocable living trust is simply a written agreement giving a person you choose the responsibility of managing your property. The reason it is referred to as a “living” trust is because it is established while you are still living. Because it is “revocable,” you can change or dissolve the trust at any point, as long as you are mentally competent. It only becomes irrevocable after your death.
Who are the parties to a living trust?
There are three individuals who must be parties to the trust agreement. The creator of the trust is you, of course. The trustee is the person who agrees to manage your assets according to the terms of the trust. The beneficiaries are those who will receive the remaining assets in your trust, after your death.
Typically, you will name yourself, and your spouse if you are married, as the trustees. That way you can maintain full control over the trust property while you are still alive. As trustee you retain the authority to sell, exchange or invest your assets anyway you wish.
The difference between a will and a living trust
Although both a will and a living trust both provide your instructions regarding inheritance of your property, a trust allows you to avoid the probate process. A trust is also more private, whereas probate records remain open to the public.
On the other hand, if you have a relatively modest estate, a will may be sufficient to handle your inheritance. A will is less complicated and likely less expensive than establishing a trust.
Other benefits of a revocable living trust
A living trust, unlike a will, can provide for the management of your assets in the event you become incapable of handling your affairs on your own. If worded correctly, a trust can also be used instead of a power of attorney. With a trust, you can also specify that your assets be distributed to your beneficiaries over time, instead of immediately upon your death.
What happens if I don’t have a will or a trust?
If you fail to leave any instructions on how to handle your estate at your death, your property will be distributed based on the laws of intestate succession in your state. Typically, that means your assets will go to your spouse or your closest surviving relative. However, that may not be what you want to happen. Another disadvantage of not having an estate plan is that someone could be selected by the court to manage the distribution of your property, and it may not be someone you trust.
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 (310) 337-7696.