At our law firm, we use a full range of estate planning tools to customize estate plans for the needs and goals of everyone we represent. One important tool to have in the toolbox is the revocable living trust, called an RLT for short.
The main reason people use RLTs is as an alternative to a will that must go through probate court before the person’s property can be distributed to his or her chosen beneficiaries. While probating a will through court is the traditional way to transfer property after death, it can take significant time and expense.
What is an RLT?
A person can set up a revocable living trust to begin operating during his or her lifetime (a trust set up to begin operation at the creator’s death is called a testamentary trust). Being revocable, the grantor (person setting up the trust) retains the power to modify the terms of the trust during life, including terminating it.
Usually, the grantor transfers title of all his or her real estate, personal property and accounts to the trust with him or herself as the beneficiary. Normally, the grantor names him or herself to be the trustee (although someone else could be chosen) who manages the assets in the trust for the benefit of him or herself as the trust beneficiary during his or her life.
From a practical perspective, not much changes during life. He or she is the trustee that manages the property he or she gave to the trust for his or her own benefit.
Incapacity
One benefit of an RLT is that the grantor can name a successor or alternative trustee to assume responsibility should the grantor become incapacitated and unable to act as trustee. Having this arrangement in place would prevent the family from having to go to court for the appointment of a conservator in case of incapacity.
Transfers after death
The grantor can also name a successor trustee to take over after the grantor’s death. At that point, the trustee normally wraps up the business of the trust, distributes the assets to named beneficiaries and terminates the trust, unless the terms provide otherwise.
In this way, the grantor’s property passes to his or her chosen recipients without having to go through probate court. This also provides much more privacy than a probate court proceeding normally would.
A living trust, however, may not be the first choice if protection from creditors is a high priority.
There are many other kinds of trusts. It is important to have a comprehensive conversation with an experienced trust lawyer to understand other options in your situation and to make an informed decision about how to meet your estate planning goals