Estate planning tip: consider a living revocable trust

| Aug 15, 2016 | Family Law

After an individual’s passing, the reason that a will must be probated is that a court must officially transfer title of the deceased’s assets to the named beneficiaries. A living revocable trust circumvents this requirement because it transfers title to the trust, all while an individual is still alive.

Yet the real benefit of this type of trust is that the creator of the trust, or trustor, also functions as the trustee and beneficiary. He or she may fund the living revocable trust by changing title to the trustee. Since complete control over the trust is retained, including the option of defunding the trust, the IRS does not view this as a change in an individual’s tax liabilities.

Is a revocable living trust right for you? Although each client’s situation is different, our estate planning law firm believes that this type of trust can be of benefit in any estate, particularly those with modest assets. The reason is simple: Court costs can be expensive, so any opportunity to bypass probate or court involvement could translate into lower estate administration costs. Similarly, an executor of an estate is also generally compensated, and those funds come out of the estate. A trust with a designated trustee would avoid both scenarios.

A living revocable trust with an incapacity clause can plan for many contingencies. The trust documentation can designate an individual to make financial decisions on your behalf, such as paying for bills or caring for minor children. The process begins with drawing up trust documentation that suits a client’s needs. After that, a trust must be funded with assets, meaning title should be transferred to the trustee, for purposes of the trust.

Source: Wealth Management, “Facilitating Life Settlements,” Jeff Hallman and Scott Thomas, July 25, 2016