The words Living Trust, and Revocable Living Trust get thrown around your lawyer’s office frequently. However, most of my clients do not know the differences between basic types of trusts, and estate planning documents. Over the next several posts I will go over some common questions clients have for me.
WHAT IS A REVOCABLE TRUST?
A revocable trust is a document created by you to manage your assets during your lifetime and distribute the remaining assets after your death. The person who creates a trust is called the “grantor” or “settlor.” The person responsible for the management of the trust assets is the “trustee.” You can serve as trustee, or you may appoint another person, bank or trust company to serve as your trustee. The trust is “revocable” since you may modify or terminate the trust during your lifetime, as long as you are not incapacitated.
During your lifetime the trustee invests and manages the trust property. Most trust agreements allow the grantor to withdraw money or assets from the trust at any time, and in any amount. If you become incapacitated, the trustee is authorized to continue to manage your trust assets, pay your bills, and make investment decisions. This may avoid the need for a court-appointed guardian of your property. This is one of the advantages of a revocable trust.
Upon your death, the trustee (or your successor if you were the initial trustee) is responsible for paying all claims and taxes, and then distributing the assets to your beneficiaries as described in the trust agreement.
Your assets, such as bank accounts, real estate and investments, must be formally transferred to the trust before your death to get the maximum benefit from the trust. This process is called “funding” the trust and requires changing the ownership of the assets to the trust. Assets that are not properly transferred to the trust may be subject to probate. However, certain assets should not be transferred to a trust because income tax problems may result. You should consult with your attorney, tax advisor and investment advisor to determine if your assets are appropriate for trust ownership.
CAN I BE THE TRUSTEE OF MY OWN TRUST?
YES. As long as you remain competent you may continue to handle your financial affairs. While necessary to have successor trustees in place after your death, during your lifetime there is no reason why you cannot be the trustee of your own Revocable Trust.
CAN I CHANGE THE PROVISIONS OF MY TRUST?
As long as you are alive the terms of a revocable living trust are changeable. When you pass away the terms of the trust are irrevocable, which means that except in very limited circumstances the terms of the trust control, and cannot be changed.
I HAVE A DURABLE POWER OF ATTORNEY DOESN’T THAT COVER EVERYHTING I NEED?
Financial institutions whether they be banks, or investment managers, are extremely hesitant to grant anyone but you access to your accounts. Even when the authorized agent presents these materials it can be difficult to get these institutions to follow their directions. A Revocable Living Trust is a much more powerful legal tool that outlines exactly what can and cannot be done on your behalf.
WHAT BENEFITS DOES A LIVING TRUST PROVIDE WHILE I AM ALIVE?
As the length of life continues to increase, families must have a plan in place for what to do when you experience a disability. Revocable Living Trusts provide assurance that should a disability or accident occur, your affairs will be managed by whom you want, and how you want it done. By ensuring that your affairs are taken care of, the possibility of a costly court-appointed guardian is reduced.
WILL I HAVE TO CONSULT AN ATTORNEY EVERY TIME I BUY OR SELL ASSETS?
NO! The trust is designed to simplify your life, not bring more chaos. Once the trust has been properly funded, any new assets are owned by you as trustee of your Trust.
DOES MY LIVING TRUST NEED TO BE RECORDED OR REGISTERED ANYWHERE?
NO! This is one of the primary benefits of a trust. It is a private document that, unlike a Will, is not a matter of public record. However, you should note that all real property is public record, as your deed should be filed with the proper authority. This will occur whether or not your assets are placed in a trust.
IF I MOVE IS MY TRUST STILL VALID?
YES! A Living Trust is valid throughout the United States regardless of where it was created.
These are just a few of the more common questions that I receive on a weekly basis. If you or someone you know has any questions about trusts, or estate planning in general do not hesitate to call Postillion Law at 904-615-6621, or Email Chris@Postillionlaw.com. We love your questions, so let us answer them!