Estate Planner's Arsenal: The Revocable Living Trust

The "Estate Planner's Arsenal" series highlights specific estate planning tools and their uses.

Generally speaking, a "Trust" is a tool for protecting and managing the distribution of your assets.  Property is transferred to the Trust by re-titling the property in the name of the Trustee.  The Trustee manages the property according to the terms of the trust for the benefit of the trust's beneficiaries.

One of the most common and popular trusts is the Revocable Living Trust.  This type of trust is set up while you are alive and property is transferred into the trust at that time or as acquired.  You (the "Grantor") typically name yourself as the beneficiary and often also as the trustee (so you maintain control of the assets) - although this does not have to be the case.   As the trust is "revocable," you can make changes to the trust during your lifetime.  You also dictate what happens to the property in the trust when you die, much like a Will.  Revocable Living Trusts are a very flexible estate planning tool and have many uses, including but not limited to:

General Probate Avoidance.  Items placed into a Trust bypass the probate process at your death.  Whether or not probate avoidance is a goal of yours depends on your circumstances, but this is a major reason for placing property in Trust.

Ancillary Probate Avoidance.  If you own real estate in another state at your death, that real estate will have to go through the probate process in the other state.  One way to avoid this result is to place that foreign real estate into your Minnesota Trust, allowing the real estate to pass according to the terms of the trust.

Speedy Distribution of Assets at Death.  If your estate must go through probate, the process takes at least 4 months and often much longer - due in part to the fact that creditors have 4 months to file a claim against your estate.  By avoiding probate through use of a Trust, your property can be distributed much faster.  

Privacy.  Revocable living trusts are private documents - generally not accessible to the public.  Probate proceedings are public and require a disclosure of assets and planned distribution, i.e. through a Will.  

Incapacity Planning.  If you become incapacitated, the Trustee (or Successor Trustee if you are the primary trustee) can manage your assets for you according to the terms of the trust - in place of having to go to court to set up a guardianship or conservatorship.  

Please note that the above uses are just several of the main uses for revocable living trusts, and that tax avoidance is not a use for a revocable living trust.

Speak with an estate planning attorney if you believe a Revocable Living Trust would be beneficial to your particular situation.  It is important to make sure that Trusts are set up, funded, and maintained properly in order to be effective.