Why You Need A Revocable Living Trust

The Revocable Living Trust is similar to a Will.  But, it has the important advantage of reducing or eliminating probate costs and delays upon your demise.

To set it up, assets are transferred from your individual name to the name of your trust.

Now, you personally no longer own the assets and there is nothing for the courts to control when you die... or should you become incapacitated.

As the appointed trustee (but, not the owner personally), you continue to control everything.

This transfer will prevent your beneficiaries from throwing money down the probate rat hole.  Plus, it will save them a great deal of time in taking possession of what you want them to have.

While you are alive, you retain full control.  You can do anything you could do before... to include buy and sell assets, change or even cancel your trust (that's what revocable means).

You will continue to file the same tax returns.  Nothing changes except the name on the asset title... provided you have taken the time to make this happen.

Just because you set up a revocable living trust doesn't mean that your work is finished.  This is where lots of people drop the ball.

Nothing is legal until you re-register the ownership name for your stocks, bonds, mutual funds, CDs, bank accounts, etc.  Your attorney should give you written instructions about how to do this.

Typically, you will be provided with several copies of what is referred to as the short form of the revocable living trust.

This is simply a couple of pages that identifies the legal registration of the trust and validates that you, as trustee, have the authority to hold title to the asset.

An exception to this procedure is with real estate.  You should let the attorney handle any real property name changes, which might include out-of-state transactions.

By the way, most living trusts also include jewelry, clothes, art, furniture, and other assets that do not have titles.  All you need to do is attach a detailed list of those items.

Assets such as life insurance, annuities, IRAs, and 401(k) accounts will not have their ownership transferred into the trust.  These items must remain in your name personally.

However, it might be appropriate for you to designate your living trust as the beneficiary for these assets.  There is no general rule for this, so seek advice from your attorney.

In all likelihood, by the time your trusts are drafted your attorney will have a clear understanding of your long-term goals and desires.

If you and your spouse are co-trustees, either can act and have instant control if one becomes incapacitated or dies.  Should something happen to both of you, the successor trustee you personally selected will take over.

Bear in mind, you may always appoint a corporate trustee to either assist or take complete control... depending on your situation.  This is especially important if minor children are involved.

If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed using your assets to pay your expenses.

If you recover, you automatically resume control.  When you die, your successor trustee pays your debts and distributes your assets.

All of this is done quickly and privately... according to instructions in your trust... and without court interference.

Successor trustees can be adult children, other relatives, trusted friends or a professional trustee employed by a trust company.  If you choose an individual, be sure to name more than one in case your first choice is unable or unwilling to act.

Your Revocable Living Trust can continue to function after you have died. Assets can remain in trust and be managed by the individual or corporate trustee you selected.

This might be appropriate if you want your beneficiaries to be a certain age before they inherit anything.  You can even scatter the distributions at specific ages.

Your trust can continue longer to provide for a loved one with special needs... keep creditors away from your beneficiaries... and, even prevent ex-spouses from getting hold of anything.

When drafted properly your living trust can reduce your estate tax obligation considerably by including a provision that lets you and your spouse take full advantage of your personal exemption.