We set up a lot of revocable trusts (also called ‘living trusts’ or ‘RLT’s) in my practice. I am quite fond of them. While they are not for everybody, they are an immensely useful estate planning tool.
A trust is simply a vehicle used to own and control property. There are three key people in a trust: the Grantor, the Trustee, and the Beneficiary. (There could be more than one of any of these, and any of these ‘people’ could be a corporation.)
The person forming the trust is called the Grantor (or the Trustor, the terms are synonymous). The grantor determines the ‘rules’ of the trust, through the trust documents, and funds the trust (puts money into the trust). The ‘rules’ of the trust govern how the trust operates, names the trustees and their powers, names the beneficiaries and what they are entitled to receive and when, and determines when the trust ‘ends’ and what happens to the property and money in the trust at that time. Among other advantages, this means that the Grantor can control the property in the trust well after the Grantor’s death, something a will cannot do.
The Trustee(s) ‘operate’ the trust after it is formed and in accordance with the trust documents. In an RLT the Grantor (you) is also the Trustee until the time he/she is incapacitated or has passed away. Then ‘successor trustees’ come into play, which you have named ahead of time. Another key feature of RLTs is at this point: while you are trustee you can change the ‘rules’ anytime you like. Once your successor is trustee, he/she cannot change the rules but must follow your wishes (as codified in the rules). Again, this gives you control of the assets after death.
The Beneficiary receives the ‘benefit’ from the trust. With an RLT, you are the initial beneficiary because you can move property in and out of the trust at will. If you become incapacitated, your successor trustee(s) can use the trust proceeds to take care of you and preserve your assets. After your death, you will have determined who the beneficiaries (or heirs) are to be. The trust passes the property outside the probate process to the people and under the terms you have established. This can be done in such a way as to completely avoid probate, and entirely privately. (When a will is admitted to probate it becomes a public document.)
While it sounds somewhat complicated, it is actually magnificently simple when we are done. Among the advantages are: you AVOID probate, your plans are PRIVATE, there are tax advantages in many instances, you have more control, it greatly simplifies matters for those you leave behind, it makes it MUCH easier for your family to care for you during any period of protracted illness, it gives you greater options for controlling your estate during such periods, and while there are upfront costs, in the long run it is cheaper—often by a lot.
Some people will say “I have very few assets, it is really worth it?” Again, it is not for everyone. And I am honest with my clients—I want you to tell your family and friends you found an honest and, at least somewhat decent, lawyer. But if you think about it—having fewer assets makes it all-the-more-important to be careful. Can you really afford to lose money to probate? To risk money on do-it-yourself estate planning.
If you would like, I would be happy to discuss this with you further in relation to your situation and to answer your questions, just call or e-mail.