Revocable living trusts have become a popular alternative to the traditional Last Will and Testament as a more efficient and cost effective way to pass property on to your loved ones when you die.
To many, the revocable living trust looks a lot like a will because it includes the details and instructions for how you want your estate to be handled at your death, and it appoints a successor who will be in charge of your estate upon your death. But unlike a will, a properly funded trust provides the following benefits:
No. Many individuals are under the impression that their will alone is sufficient to avoid probate. Unfortunately, a will is simply an expression of your wishes and must go through some kind of court process before the assets can be distributed to the heirs. The reason probate is needed is because since the owner of the property is deceased, a formal legal proceeding is required to remove the decedent’s name from the property and title the asset in the new owner’s name. Depending on the complexity of your estate and whether any disputes or claims arise, this process can take years.
A revocable living trust is a legal document that holds title or ownership to your property and assets. When you create a revocable living trust you transfer ownership of your assets to the trust (a process referred to as “funding” the trust). Like a will, the trust is “revocable,” meaning that you can modify or eliminate it at any time. A revocable living trust is created by a written document which appoints a “Trustee” (typically you during your lifetime) to own and manage the trust assets and which gives detailed instructions on how the property is to be managed and eventually distributed.
No! The revocable living trust is a legal document that allows you, as the Trustee, unlimited access to your assets during your lifetime. Furthermore, since the trust is “revocable,” you can transfer your assets into and out of the trust as you deem appropriate.
First, you must sign a formal, written trust agreement. Then, for the trust to be effective it has to own title to most all of your property or assets (certain assets, such as retirement accounts, are oftentimes not included in your trust). This process is called “funding” your trust, which is the process of transferring title of your accounts or property to the name of the trust. For example, accounts previously titled in the name of John and Mary Smith would, after creating their trust, be held as “John and Mary Smith, Trustees of the Smith Family Trust dated mm/dd/yy.”
When the assets are in the name of the trust there is no need for probate since the estate is now controlled by the trustee of the trust. After you (or you and your spouse) pass away, the trust identifies the person who will act as successor trustee. The trust gives that person the right to manage all assets on your behalf as you have instructed in the trust document.
Four parties are involved in the creation of a revocable living trust:
In Arizona, any competent adult can be the successor trustee, or you can appoint a corporate or institutional successor trustee. You can appoint more than one successor trustee, can delegate different duties to each successor trustee, and can retain the power to remove the successor trustee and appoint a new one. Appointing an alternate successor trustee is suggested.
Most people tend to nominate their loved ones to act as successor trustee. Here are a few things to consider when naming a loved one to act as successor trustee:
These are the kinds of questions you should ask yourself when deciding who should be successor trustee. You can also discuss these questions and issues with your estate planning attorney.
Probably the most common mistake is the failure to properly “fund” the trust. That means that the clients failed to re-title their assets in the name of the trust. Another common mistake is the failure to properly consider the role and responsibility of the successor trustee and choosing someone who is not properly trained. Another mistake is to have a trust that may fit the needs of someone else, but not your situation. It is very dangerous to create your own trust from a computer-generated “one trust fits all” form. That is why it is important that your trust be properly drafted by an attorney concentrated in estate planning.
The exact cost of a revocable living trust depends on factors such as how complicated your estate is, how complex the terms of the trust are, and whether tax planning is needed. Moreover, in addition to your revocable living trust, we will also prepare other important estate planning documents including a Certificate of Trust, “Pour-Over” Wills, a Living Will and Health Care Power of Attorney and a Durable General Power of Attorney. All of our revocable living trust packages are done on a reasonable flat-fee basis that will be clearly communicated to you after a free consultation — so you will never receive a “surprise” bill from our office.