What is a Revocable Living Trust and Why do I need it?

Many of you have heard estate planners state that you should have a “trust” to protect your assets. You may have heard of the terms “revocable” and “irrevocable”, or seen an ad for setting up a “living trust”. But what does all this mean?  In this article, we will first explain what a revocable living trust is in layman terms, then inform you why you need a revocable living trust too.

In order to fully explain what the popular term, “living trust”, or “revocable living trust” means, we need to begin by defining each word in the term.

What is a Trust?

A trust is a legal document that separates designated property from the rest of your estate for certain people.  It is similar to a will, but a will determines how your property will be divided upon your death, whereas a trust takes your property out of your hands while you are still alive.

What is a Living Trust?

As such, a living trust is simply a trust you set up while you are alive. Similarly, “revocable” simply means that the terms of the trust can be changed by the creator of the trust.

What is an Irrevocable Trust?

Once you pass away, the trust can no longer be changed by you and automatically becomes “irrevocable”, or unchangeable.

Why do I need a Living Trust?

If you do not have a trust, or a will, your property and assets will become your “estate”. With no designated recipients, your estate will be handed to the State and it will be up to a Judge to decide who will receive what part of your property.  This is called Probate.

Having a trust can prevent an estate from going to probate. Having a trust can also prevent disputes among your family and other relations leading to probate if they disagree with the contents of your will.

So what?

You might wonder why creating a living trust matters, so here’s why in a nutshell:

• Probate is public information, meaning your assets will become known to all. Having a trust will ensure confidentiality of who gets what and when even after your death.
• Your relatives might end up wasting a lot of money on legal fees fighting over your assets in probate, leaving little left.
• Setting up a trust allows you to assign a “trustee”, or person who would manage your property on your behalf for the purpose you designate. For example, you could leave gifts to a child or a person of special needs have someone else manage those assets to ensure the trust assets are put to good use.
• You can assign a co-trustee to make decisions on your behalf if you become incapacitated.
• If you prefer assigning yourself as the trustee, you can select a successor trustee to become the new trustee upon your death.
• With a trust, you can assign guardians to your children or managers for the property you leave your children.
• Using a trust, you can designate how you want your debts to be paid upon your death.

What do I need to create a Revocable Living Trust?

It depends on the type of assets you have. You would need a trust document notarized by a notary public.  You would need to list all the property you would like included in the trust. Real property would need to be re-titled under the name of the trust.  If you need assistance in designing a trust, or creating a trust, call Lum Law Group for quality advice!