When many people think of
estate planning, they think only of a will, or a document that will determine the distribution
of their property after death.
However, there is another strategy, known as a revocable living trust,
which can determine the final distribution of assets while avoiding the
costly and prolonged process of probate.
Probate is the legal process in which an individual’s final affairs
– such as acceptance by a court of the validity of the will, resolution
of any financial claims against the estate, and disposition of property
and assets as provided in the will – are carried out. Probate can
take months to resolve and can devour up to eight percent of the value
of an estate in various legal fees.
A revocable living trust avoids probate, and allows you to determine the
control and distribution of your assets now as well as after your death.
At its heart, a revocable living trust is a legal device which is used
to hold property outside of the main estate, yet still under the control
of the individual who created the trust. This is called a revocable living
trust simply because the individual who creates the trust has the right
to dissolve or alter the trust at any time.
The person creating the trust, called the trustmaker, transfers property
and assets into the trust where it will be overseen by a trustee who has
been named by the trustmaker.
In most cases, the trustmaker and trustee are the same person, which means
the trustmaker continues ownership and control of the assets in the trust.
The trustee can also continue to enjoy use of those assets and any profits
gained from those assets.
Revocable living trust contain two clauses – what will happen if
the trustee is mentally incapacitated, and what will happen if the trustee
dies – that are key to using such trust as a way to avoid probate.
If the trustee becomes mentally incapacitated, the trust allows for control
of the assets to be passed to a new trustee named in the trust document.
The new trustee will then assume responsibility to control the trust until
the trustmaker’s death.
Upon the trustmaker’s death, all properties and assets of the trust
are transferred to the designated recipients specified in the trust.
Since this property was transferred as part of a legal trust, and not left
to a beneficiary under a will, it is not subject to the prolonged, often
expensive probate process.
Estate planning is serious business.
Contact us today if you would like to discuss this or other estate planning strategies.