Revocable Living Trust
Revocable Living Trust
Lots of people remain confused about the difference between a living trust and a will. With a will your estate can get tied up in probate for years, and drain a portion of the money left in the estate. A living will can help you avoid that issue. A will has to be filed in probate court whereas a living trust does not. This prevents your wishes from becoming public record. There are still other reasons why a living trust might be preferable to a will. With a living trust, and some knowledge of the law, you can avoid having to pay certain estate taxes. The living will gives you control over who gets what when you are gone, and even allows for a person of your choice to manage your matters should you have an accident or illness that leaves you unable to do so.
A living trust cuts through much of the red tape associated with wills. A living trust is created with a legal document. The document provides the information needed to distribute your belongings and property after your death. The person who creates the living trust is called the grantor. Once the property and such is listed in the living trust it then belongs to that trust – not the grantor. However, the grantor can still do whatever he or she wishes with the property and other belongings. Anything can be removed or added to the trust at any time.
One of the main reasons people create living trusts is so that their friends, loved ones and associates can quickly and easily receive the given properties or belongings upon their death. A living trust allows you to bypass probate court and keep all the beneficiaries private. Since there’s no delay through the probate court the items are distributed almost immediately upon your death. In probate court the will is filed and becomes public record. Your family then has to take inventory of your belongings and have everything appraised. The court system then validates the will. Any and all outstanding debts are paid from the estate including lawyer and court fees. After all this is taken care of the property and belongings are then divided amongst the beneficiaries; it can take years.
Things to consider listing in your living trust include your house and other properties, stocks, bonds and mutual funds, money market and brokerage accounts, art, jewelry, antiques and valuable collections. When it comes to a jointly-owned home many people don’t list these on the living trust because, should they die, the partner will then get the property. But, if you die at the same time, like in a car accident, the matter of who receives the house or property is up to the court system. It’s a good idea to list any and all real estate – no matter if you own it alone or with a partner – into the living trust.
Things that shouldn’t be placed in the living trust include personal checking accounts, property with a quick turnover (property you purchase to fix up and sell immediately, for instance), the family car (many insurance companies will not insure a vehicle owned by a trust), life insurance policies and interest or principal from another person’s trust.
It can be a little more challenging to understand all the laws concerning placing real estate into a living trust. Some states require a reassessment of the property first; others do not – if you are listed as a trustee. Some states impose taxes on living trust transfers; some states don’t. In most cases you do not need to change the registration of insurance policies for properties listed in the trust. You’ll still receive tax breaks should you sell the home even if the trust is the owner now. Federal law forbids lenders to from implementing “due on sale” laws for homes listed in the trust. You can find information pertinent to the state in which you live by reading more about trusts and real estate online.
A living trust requires you to name beneficiaries. There are three different types of beneficiaries: the primary beneficiaries who receives specified properties or belongings, alternate beneficiaries in cases where the primary beneficiaries have passed away, and residuary beneficiaries who receive everything not given to the primary or alternate beneficiaries.
You can name any beneficiaries you wish and you are not required to name your spouse as the beneficiary at all, if this is your wish. However, in states that recognize community property, your spouse could file a claim in court. The court will not invalidate the living trust but may revise it to include claims by the spouse. Read more online about community property and check to see if your state recognizes it. If so, you might be required to leave half of what you own to your spouse.
If you wish to leave your property to a minor child in the living trust you can do so. You may then appoint someone to guard over and manage the property until the child meets certain requirements. You can state the requirements, such as when the child turns 18, or when the child graduates from college. If you wish to leave one of your children completely out of the trust be specific in the details. If you aren’t, a court can later find that you “overlooked” the child, and make him or her one of your beneficiaries – even if you did not want this. If you wish to appoint a guardian for an underage child this isn’t done in the living trust document. Guardianship matters are handled through a last will and testament.
You don’t have to be married to create a living trust with your partner. It’s important that you discover whether your state recognizes community property or individual property. Most married couples, or even unmarried couples, become co-grantors and co-trustees for the living trust. They can still, however, choose their own beneficiaries separate from each other. If one spouse dies, his or her belongings are distributed to the beneficiaries, but the other spouse’s belongings stay with the trust, including anything given by the deceased spouse. When the second spouse dies the remainder of the trust is then distributed.
If you’re a smart planner you might want to consider the living trust. It can make owning and distributing property after your death much easier than a last will. It can also be much less expensive to have the living trust documents drawn up than a last will. You can, however, have both a living trust and a last will. Each is a separate thing entirely. You can read much more on this subject when you research it online.