Start researching about ways to plan your estate and you’ll likely come across the Revocable Living Trust. Sounds pretty impressive to be sure, but what exactly is this document and how does it work for you?
A Revocable Living Trust is a legal document in which you can specify how you want your property to be managed and distributed during your lifetime and after your death. Note that I said “during your lifetime” – unlike a Will, a Living Trust does not wait for your death to become valid.
Once you create a trust, you “fund” it by transferring title to assets. So, instead of owning your home as an individual, your trust would be named on the deed instead.
The trust is controlled by a trustee, which can be you or anyone of your choosing. If you designate yourself as the trustee, you can still maintain control of all your assets and invest and spend them as you normally would.
The trust also has a named beneficiary, which can also be you or anyone you choose. When you pass on, a successor trustee – usually your heirs – would step in and take over control of the trust and all its assets.
Living trusts can also allow you to provide for disabled dependents, minor children and even create inheritance incentives for your beneficiaries. And because it does not require your death to become active, you can create provisions that will protect you and your estate in the event that you become disabled or incapacitated later in life.
The reason it’s called a Revocable Living Trust is because the trust is formed within your lifetime (“living”) and can be changed and even revoked by you at any time.
Is a Revocable Living Trust a Substitute for a Will?
While a trust does everything a Will does (and even a bit more), you’ll still want to have what’s known as a “pour-over Will” to ensure that any assets not held in the trust are transferred to the trust immediately upon your death.
Assets already held within the trust are not subject to probate – those transferred via a pour-over Will must go through probate first.