The revocable living trust is a very useful estate planning tool. Contrary to popular belief, you do not have to be wealthy to benefit from a living trust. You continue to control the assets that you convey into a revocable living trust because you can act as the trustee and the beneficiary while you are alive and well. It is possible to change the terms of the trust, and you can even dissolve the trust entirely if you choose to do so. When it comes to trust administration, understanding the importance of funding a trust is crucial.
The downside to probate
When someone passes away, their assets are distributed to the beneficiaries in accordance with that person’s wishes, Probate is the legal process of estate administration. While it does provide protections, it also comes with certain drawbacks. One of the pitfalls of probate is that it is time consuming. A relatively simple case can typically pass through probate in just under a year, in most jurisdictions, and this is a considerable amount of time to wait for an inheritance. There are also expenses that can accumulate during probate, and it is a public proceeding. Anyone who wants to know how you distributed your resources can access probate records to find out the details.
A trust allows for probate avoidance
When you create the trust agreement, you name a successor trustee to manage your trust after you pass away, and you name successor beneficiaries. After your passing, the trustee would follow the instructions that you leave behind. The distributions from a trust are not be subject to the probate process. Revocable living trusts allow families to avoid probate, and this is why they are so popular.
How to fund a living trust
When you convey assets into the living trust, you are funding the trust. To do this, you change the ownership registration of the property that you want to convey into the trust. You make the trust the new owner of the property. You would typically list the property that you are conveying into the trust in the trust declaration. It is also possible to list this property on an additional document called a schedule. Another option would be to use the trust agreement to transfer the property to the trustee, and of course, you will act as the trustee while you are living, so you are not surrendering control of the property.
How a revocable living trust works
The revocable living trust is an estate planning device that you should certainly explore before you make any final decisions. Contrary to a widely held belief, you do not have to be a multimillionaire to benefit from the creation of this type of trust. Plus, you do not surrender control of assets that you convey into a living trust. You can act as the trustee while you are living, and you can also act as the initial beneficiary. It would be possible to change the terms of the trust, and you can even rescind or revoke the trust entirely at any time.
The need for a trust declaration
When you create the trust declaration, you name a successor trustee to handle the trust administration tasks after you are gone, and you also name successor beneficiaries. After you pass away, the successor trustee would follow instructions that you leave behind in the trust declaration. Assets that have been conveyed into the trust would be passed along to the beneficiaries in accordance with your wishes, and the probate process would not be a factor.
Consider including spendthrift provisions
Plus, you can include spendthrift protections if you use a living trust as the centerpiece of your estate plan. Many people are not very good money managers, and you may be concerned about a family member squandering his or her inheritance. If you were to make such an individual the beneficiary of a living trust, you could instruct the successor trustee to distribute the inheritance over an extended period of time, after your passing. In this manner, the spendthrift family member would be provided for, but he or she would be protected from his or her own bad decision-making.
Specifics about funding a trust
Now that we have provided the necessary background, here are the specifics you need to know about funding a trust. This is an important aspect of Charlotte trust administration. When you re-title your assets into a living trust, you are funding a trust. Funding the trust involves changing the ownership registration information on the property that you want to put into the trust. The trust would be named as the owner of the property.
Join us for a FREE seminar today! If you have questions regarding funding trusts or any other trust administration matters, please contact the experienced attorneys at The Potter Law Firm for a consultation. You can contact us either online or by calling us at (704) 944-3245 or for individuals in Kentucky at (606) 324-5516 (Ashland, KY) or at (859) 372-6655 (Florence, KY).
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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