Revocable Living Trust Basics
Setting up a revocable living trust will help you avoid tedious probate proceedings, provide legal and financial security, and give you peace of mind that your wishes are carried out just as you want them to be.
If you haven’t stopped to consider how a trust may help you pass your legacy on, you could be making a critical estate planning mistake. For individuals or families with any assets at all, or children they wish to provide for after their passing, setting up a trust is an important consideration. People often fail to appreciate the power a trust can have as part of a well-crafted estate plan, but that can be a costly mistake. Trusts are flexible—and powerful—tools that anyone with even minimal assets can use to gain greater control over how they pass their assets, properties, and legacy on to future generations.
There are many types of trusts available, each designed to help achieve specific goals. A qualified estate planning attorney can help you determine which type (or types) of trust is most appropriate for you. This article discusses the basics of a revocable living trust – one of the most common types of estate planning instruments in Florida and in the U.S.
Living Trust Basics
Living Trusts are written agreements that ensure legal protection for a variety of reasons. Trusts begin with three different parties. The Trustmaker (Grantor), the Trustee, and the Beneficiary. There are often more than one person filling each of these roles as the Living Trust legal agreement is formed.
After the signatures are in place, the Trustmaker funds the Living Trust. This process involves an attorney preparing documents to aid clients with the transfer of actual assets into the name of the Living Trust, or initially re-titling the assets into the “Trust Corpus.” This is the step that actually gives power to the Living Trust. Once the funds are in place, the Living Trust becomes valid as a legal document and the Trustee can manage the assets for the Beneficiary in accordance with the instructions written in the trust document. Trustees can either be people or institutions (like banks.)
Unless other instructions are provided in the Living Trust, when the Trustmaker dies, the Living Trust becomes irrevocable, locking all aspects of the trust document into place.
One of the biggest benefits of this kind of agreement is the ability to avoid probate. The biggest problem with Probate Court is the delaying of the transfer of assets. If the assets are needed immediately, Probate Court is the largest obstacle in actually getting those assets transferred quickly. Also, probate can be quite costly. Attorneys charge up to 5% of the estate in fees to administer an estate depending on its size and other factors. By using a Living Trust, not only can those costs be saved, but so can the monetary value of the assets within the trust.
Probate can also become a matter of public record, therefore making widely known something that people may not want known. While most people aren’t in the celebrity spotlight, they still might prefer that their personal family information remain confidential. Public record can also create unwanted scrutiny. It may make your beneficiaries a target for unwanted solicitation, either by individuals or by companies that may be looking to provide a cash advance on an inheritance in exchange for an egregiously high interest rate.
The selection of the parties involved in a Living Trust is arguably the most vital aspect of the entire process. Choosing the right people can be just as important as the actual meaning of the legal document. Careful consideration should be made when selecting parties for your Living Trust.
Build Your Legacy
The purpose of establishing a trust is to ultimately help you better realize a vision for your estate and, in turn, your legacy. Get informed on revocable living trusts before making important legal decisions, and be sure to state clear estate planning goals to an experienced attorney before setting up a living trust. It is vitally important that the trust be properly drafted and funded, so that you and your beneficiaries can reap the benefits you intend.