AVOIDING PROBATE WITH A REVOCABLE LIVING TRUST
If you wish to simplify administration of your estate or if you are concerned with privacy, you might want to incorporate a revocable trust into your plan. A revocable trust is a written document that governs how property is administered and distributed both before and after you die, avoiding state intestacy laws and probate. The person who creates and funds the document is called the “grantor.” The grantor can change or remove the trust’s terms at any time and add or remove property from trust ownership when they want, usually tax free. A trust is a binding contract between the grantor and the trustee. Just like with a will, the terms of your trust determines who gets your assets, and how and when.
Revocable trusts may not be for everyone. You should consider one if:
- You have real property in multiple states
Real property requires a probate proceeding to be opened in the county in which it’s located. If the property is outside the county you live, there will be a probate proceeding in each location, unless it’s owned by a trust.
- Privacy is important to you
Once filed with the court, a will is matter of public record.. Anyone interested in your estate (for business or creditor reasons, or just out of curiosity) can find out what’s in your estate and who will receive what. Assets held in your trust bypass the probate process and are generally private information.
- Continuity of management upon incapacity and death
If you become incapacitated or die, assets owned by your revocable trust can be managed by the trustee for your benefit or the benefit of your heirs—with little or no delay.
- You fear a will contest.
In the event that a will’s validity might be challenged, especially by a close relative, the probate process may be delayed relatively easy by someone who might contest it. Since there would be no probate with a fully funded revocable living trust, it would be much more expensive and time consuming to challenge its validity.
If you have a revocable trust, do you need a will? Even with a revocable trust, it is critical that you still have a will to distribute any assets you did not transfer to the trust during your lifetime, as well as for designating an executor (or personal representative) and a guardian for any loved one who is a minor. In this case, your will can add non-trust assets to your revocable trust after your death and distribute them according to the trust’s provisions. This kind of will is sometimes called a “pour-over” will.
CHOOSING A TRUSTEE
If you’ve decided to incorporate a trust into your estate plan, you’ll need to choose a trustee. You can be the trustee of your revocable trust, but if you become incapacitated or die, you’ll need a successor. This could be your spouse or a family member, relative, friend, business associate, professional advisor or corporate fiduciary, such as a bank or trust company, or a combination. When you’re choosing a trustee, you want to know that:
- Your wishes and desires will be carried out
- You can rely on your trustee’s responsibility, judgment, common sense, good organizational skills and willingness to seek professional guidance
- The trustee is available and willing to serve
Your choice could depend upon your trust’s:
- Nature and value
- Expected Duration
- Assets’ Nature & Complexity, physical location and
- Any special needs or circumstances of your beneficiaries
What does a trustee do?
A trustee has both administrative tasks and legal obligations. The administrative tasks include: 1) Preserving and protecting the estate assets (including investing)
2) Keeping records of income and principal, and not mingling trust assets with non-trust assets
3) Exercising discretionary authority in a reasonable manner
4) Filing state and federal tax returns
5) Collecting all trust receipts and determining whether each receipt belongs to principal or income—or both
6) Paying all expenses and deciding if each expense is principal or income, or allocable between them W
7)Providing accountings and communicating with the beneficiaries