One of the key aspects to any estate plan is the revocable living trust. While the revocable living trust may serve multiple functions, typically, the most important function that a living trust serves is the ability to allow one's assets to transfer to their loved ones after death without the need for probate.
Probate is the government's plan for those who don't plan and it's a way of getting assets from the individual to his or her loved ones after death. Unfortunately, probate is also a government process with a number of downsides (i.e. time, cost and headache). You can read more about probate on our website, but you should generally know that probate is a process that your loved ones shouldn't have to go through after you pass away.
Thankfully, the revocable living trust allows assets to avoid probate. But how does it work? We explain the living trust to our clients in terms of a bucket, rather than as a complicated legal document. There are three parties to a bucket and three parties to a living trust. First, there is a person who puts something into the bucket (“Trustor”). Next, there is a person who manages the assets that are placed in the bucket (“Trustee”). Finally, there is the person who receives all of the benefits from the assets placed in the bucket (“Beneficiary”).
In the most typicaly situation, where Husband and Wife set up a living trust, they are all three parties: Trustor, Trustee, and Beneficiaries. The terms of the revocable living trust are that they can add property to their trust bucket at any time, they can take out property at any time, they get all the income and principal, and can amend or revoke the trust at any time. In other words, Husband and Wife do whatever they want to do.
How do Husband and Wife get their assets into their living trust? They simply change the title of all their assets to read in the name of the family trust. For example, assume that Husband and Wife's real names are Bob and Mary Smith. In this case, Bob and Mary would have to change the title on their bank accounts, real estate and investments to no longer read in the name of Bob and Mary Smith. Instead, their assets should all be titled roughly as follows: “Bob and Mary, Trustees of the Bob and Mary Smith Family Trust”. By doing this with each asset, they have now funded their trust with their assets, one by one.
The process of titling the assets in the name of the trust (also referred to as “funding” the trust) is incredibly important because when Bob and Mary pass away, only those assets that are titled properly in the name of the trust will avoid probate. Generally, all other assets that are outside of trust will be subject to probate. The process of funding the trust is of utmost importance and you can read more about it on our website.
With a living trust, not only can Husband and Wife prevent the probate process for their loved ones, but they can control who will be in charge of their estate and the manner in which their assets are distributed after they pass away. The person that they name to be in charge after they pass away is known as the Successor Trustee. The Successor Trustee's job is to carry out the instructions left behind for him or her in the trust document which, for example, might provide that the estate is to be divided equally between Husband and Wife's three children.
The possiblities with a living trust are endles and every trust is crafted to address the specific clients' needs. For questions about your existing living trust or setting up a new living trust, call our experienced estate planning attorneys at the Law Office of James F. Roberst & Associates, APC, and we will be glad to assist you in any way that we can.