Law FAQ: Questions About Revocable Living Trusts

What is a revocable living trust?  A revocable living trust is a legal document that, just like a will, contains your instructions for what you want to happen to your assets when you die.  But, unlike a will, a living trust can avoid probate at death, control all of your assets and prevent the court from controlling your assets if you become incapacitated.

How does a revocable living trust avoid probate and prevent court control of assets at incapacity?  When you create a revocable living trust, you transfer assets from your name to the name of your trust, which you control.  Legally, you no longer own anything; everything now belongs to your trust.  So there is nothing for the courts to control when you die or become incapacitated.  The concept is simple, but this is what keeps you and your family out of the courts.

Do I lose control of the assets in my revocable living trust?  Absolutely not.  You keep full control.  As trustee of your trust, you can do anything you could do before – buy and sell assets, change or even cancel (or revoke) your trust.  That’s why it’s called a revocable living trust.  You even file the same tax returns.  Nothing changes but the names on the titles.

Is it hard to transfer assets into my trust?  No.  Your attorney, financial advisor, insurance agent and other professionals can help.  Typically, you will change titles on real estate, stocks, bonds, CDs, bank accounts, investments, insurance and other assets with titles.  Revocable living trusts also own tangible personal property and other assets that do not have titles.  Some beneficiary designations should also be changed to your trust so the court can’t control them if a beneficiary is incapacitated or no longer living when you die.

Doesn’t this take a lot of time?  It will take some time – but you can do it now, or you can pay the courts and attorneys to do it for you later.  One of the benefits of a revocable living trust is that all of your assets are brought together under one plan.  Don’t delay “funding” your trust; it can only protect assets that have been transferred into it.

Feel free to contact us for more information about how a revcoable living trust would work in your estate plan.

Law FAQ: What is Probate and why is it bad?

What is Probate and why is it bad?  (a.k.a. Why simply having a will might not be enough.)

Probate is the legal process through which the court sees that, when you die, your debts are paid and your assets are distributed according to your will.  Indeed, a will is a “ticket” to Probate.  If you don’t have a valid will, your assets are distributed according to state law.  But….

Probate can be expensive.  Legal fees, executor fees and other costs must be paid before your assets can be fully distributed to your beneficiaries.  If you own real estate in other states, your family could face multiple probates, each one according to the laws in the state where real estate is owned.  These costs vary, but a good rule of thumb is the cost of Probate will be 6% of your total estate.

Probate takes time, usually nine months to two years, but often longer.  During part of this time, assets are normally frozen so an accurate inventory can be taken.  Nothing can be distributed or sold without court and/or executor approval.

Your family has no privacy.  Probate is a public process, so anyone can see what you owned, whom you owed, who will receive your assets and when they will receive them.  The process “invites” disgruntled heirs to contest your will and can expose your family to solicitors.

Most importantly, your family has no control.  The Judge and the Probate Court process determines how much it will cost, how long it will take, and what information is made public.

Our firm employs estate planning strategies that can reduce the hassle of the probate process, or even eliminate it altogether.

Feel free to contact us for more information.