In Part 1, we explored what a Testamentary Will was and the typical costs associated with Probate of the Will. In Part 2, we will explore what a Revocable Living Trust is and start to explore the benefits of a Revocable Living Trust.
A Revocable Living Trust is a document that tells the successor trustee (acts similar to the executor or the personal representative in Testamentary Will) what you want to happen with your property after you pass away, and you can amend (change) the Revocable Living Trust at any time in the future. A revocable living trust can also continue beyond the immediate distribution and can make distributions for ongoing care of children or pets.
One of the most confusing aspects of a trust for most people is that the assets you own would change from being your property, to being the property of the newly created entity (your trust). The trust would then become the owner of the property, but you would still be able to do anything you did before with the property. You can buy property to put into the trust. You can sell property from the trust. You can give property away. Anything you do before a Revocable Living Trust, you can do after the Revocable Living Trust.
To illustrate this, let me use hypothetical clients named John and Jane Doe. If John and Jane Doe had a bank account in their names, the ownership would be listed as:
Primary Owner: John Doe Secondary Owner: Jane Doe
Both John and Jane Doe can write checks on the account, make deposits into the account, or even close the account and open additional accounts. Either John or Jane Doe could act independently without the other to do any of these transactions.
After the trust is created, then John and Jane Doe could put the bank account into the trust and the ownership would be listed as:
Primary Owner: The John and Jane Doe Revocable Living Trust Dated November 19, 2014
Trustee: John Doe Trustee: Jane Doe
With the trust, both John and Jane Doe can write checks on the accounts, make deposits into the account, or even close the account and open additional accounts. Either John or Jane Doe could act independently without the other to do any of these transactions. There are no differences in what John and Jane could do with the property before or after it was placed in the Revocable Living Trust.
Benefits of a Trust
There are three main reasons people choose to have a Revocable Living Trust over a will. A Trust will typically allow an estate to save money, save time, and protect privacy of the estate plan and assets.
While we explored the Probate expenses in Part 1, the Revocable Living Trust avoids most of those expenses by avoiding probate. There are some fees associated with assisting the successor trustee after death, but typically it is far less than the costs associated with a probate. A Revocable Living Trust will often be far cheaper than a will upon death when considering probate costs in most states.
In Part 3, we will conclude with exploring the benefits of a Revocable Living Trust and the benefits of a Testamentary Will.