What You Need to Know About Revocable Living Trusts
A living trust is a document that allows you to place your assets into a trust during your lifetime. After you die, the trust will distribute the assets to your beneficiaries. The trust provides control over your assets and avoids probate.
How a Revocable Trust Works
A revocable trust is a legal document that allows the grantor or the person who creates the trust to transfer their assets to the trust’s ownership during their lifetime.
The trust controls the assets while the grantor is living and distributes them to named beneficiaries after death. It is generally advisable to place as many assets into the trust as possible to maximize its benefits. Still, some assets, such as life insurance and Individual Retirement Accounts (IRAs), are not eligible for transfer.
A living revocable trust is established when a trustee is named to manage the assets in the trust for the grantor’s benefit during his lifetime. Most grantors name themselves trustees to have complete control over the trust assets. In this case, a successor trustee is also named to take over after the grantor’s death to manage the revocable trust and distribute assets.
A revocable living trust gives the person who creates it (the grantor) the ability to make changes or even dissolve it entirely. An irrevocable living trust cannot be changed after it is set up and gives the grantor less control.
How a Living Trust Avoids Probate
A living trust is often chosen because it helps avoid probate. Probate is a court process that looks over and confirms wills. The process can take months, costs money for an attorney and court fees, and makes the will public record.
If you use a last will to transfer assets after you die, the will has to go through probate before it can be used. Once the will is approved, then the assets can be transferred. A trust, unlike a will, does not need to go through probate and is not part of the public record. No one will know about your beneficiaries or what assets you are distributing.
There are no fees associated with a trust. When you use a trust, your assets are distributed according to the instructions you include in the trust document. After you die, you can transfer your assets to your beneficiaries immediately or set up transfer dates in the future. For example, you could transfer your purchases on your beneficiaries’ milestone birthdays to ensure they’re mature enough to handle the inheritance.
It’s important to remember that even if an asset doesn’t go through probate, it may still be subject to estate tax. Assets passed down through a trust or will are included in the taxable estate. The federal estate tax only applies to estates worth more than $5.43 million. State estate taxes can vary widely, with some states not taxing estates and others taxing even moderate-sized estates.
A pour-over will is often recommended alongside a living trust. If any property is inadvertently left out of the trust, the pour-over will move those assets into the trust.
Conclusion
A living revocable trust can eliminate the need for probate. While no living trust involves no fees, it may be subject to estate taxes. It gives you control over your assets but only if you plan to take advantage of the flexibility of changing your will.
Estate Planning Lawyers Colorado can help you with all your estate planning needs, including wills, trusts, probate, and legacy planning. Led by Atty. Marc Carlson, we focus on helping clients to protect themselves with lifetime disability planning and asset transfer planning. If you’re looking for a trust attorney in Colorado, we’re more than happy to help. Get in touch with us to schedule a meeting with Marc!
