A Comprehensive Look at Revocable Living Trusts
To gain a full understanding of what a revocable living trust is and its function, a comprehensive look at the different terms associated with this document can be very helpful. A full list of these terms and their explanations are provided below.
Definition of Terms
Revocable Living Trust
This is a document that can be included in your estate planning process. It makes provisions for the division of your assets after your death. It is “revocable” in that you can revise, update, or revoke the instructions it contains while you are still alive. For example, you can remove property from the trust at any time.
A revocable living trust is also known as a living trust, grantor trust, or inter vivos trust.
The grantor in a revocable living trust is the individual who creates the document and maintains final control of the assets listed in the living trust.
This is the individual authorized to oversee and manage the assets contained in the living trust. The grantor can appoint a trustee or choose to assume the role themselves. If a trustee other than the grantor is appointed, then the trustee has authority to manage the trust from the time the trust is created as well as after the grantor’s death.
These are two individuals who fund and manage a revocable living trust as a team. If one trustee becomes incapacitated, the other trustee will then retain full control over the trust. Co-trustees are usually spouses.
If the primary trustee dies or is incapacitated, a successor trustee is usually appointed to take over management of the trust.
Property that can be listed in a Revocable Living Trust
Only valuable property can be listed in a revocable living trust. For example, you can include cash accounts, real estate, company shares, etc. Low-value assets are usually not placed in a trust. Placing your high-value assets in a trust secures them until they can be distributed to your beneficiaries.
How is a Living Trust created?
The first step involves drafting a legally appropriate Living Trust document and designating your trustee. Once this is done, you can start listing and adding the property you want to include in the trust. Details of the property should be included, such as their monetary value, and their location. You will also have to include the beneficiaries during this stage.
When personal property is transferred to a living trust, the living trust then retains ownership of that property. Transfer of property is done by listing the property in the document; however, all titled property (real estate, accounts, etc.) must be re-titled if it does not match the name of the trust.
Should you have a living trust?
The main, foremost benefit of a living trust is to avoid probate, thus ensuring privacy as well as saving costs and time. They are usually required by those with complicated estates, where the distribution of assets is a complex matter. This includes having numerous assets that need a more detailed allocation plan.
Thus, a living trust may not be necessary for those with less elaborate estate plans and fewer assets. In such cases, a Last Will and Testament is often sufficient for the naming of beneficiaries and the subsequent distribution of assets after your death.
The trustee named in a living trust is responsible for managing its assets and retains its control until the grantor passes away. In the event that the trustee also becomes incapacitated and dies then the successor trustee will step in to take over management of the trust.
Revocable Living Trust Vs Will
Both these documents have similar functions since they allow you to make provisions for after you pass on. Their main difference lies in the matter of privacy. A Last Will and Testament becomes public property upon your death and is subject to probate supervision where necessary. In contrast, a Living Trust ensures that your assets will not go through probate and that your beneficiaries can quickly claim their inheritance. Thus, revocable living trusts make the distribution of your assets less costly and less time-consuming.
However, since not all assets may be listed in a Living Trust, it is necessary to create another document – called a Pour-Over Will – that specifies instructions about the distribution of any assets that have been left out of the Living Trust.
In a Last Will, the individual responsible for carrying out your wishes is called the executor. This executor has a similar function to the successor trustee named in a Living Trust.
Living Trust Vs Living Will
Living Trust and Living Wills are both estate planning tools. As mentioned earlier, a living trust is meant to protect your assets until your death where they are then allocated to your beneficiaries according to your instructions. However, a Living Will deals with outlining your wishes concerning medical treatment and your preferred health care in specific situations where you become incapacitated.
Definitions for Similar Documents
Last Will and Testament
This is a fully legal document that enables you to set down instructions about how you want your assets to be divided and allocated after your death. It allows you to name your beneficiaries, heirs, and any other provisions you wish to make.
Living Will/Healthcare Directive
This document contains your express wishes regarding the medical treatment you will receive in the event that you are become incompetent to make medical care decisions for yourself.
This document protects your interests and wishes regarding what you would want to happen after your death. You can make arrangements for your funeral service and decide what happens to your remains in an End-of-Life Plan.
This is a type of will that spells out how other assets that have not been included in a Living Trust will be distributed.
This is often a real estate document that facilitates the transfer of property between a seller and buyer and where the seller has a guarantee of a clear title.
This document is similar to a warranty deed, except, in this case, the buyer sells the property without guarantee of a clear title.