Although a will may still be the first choice for many who want to pass their estate to their heirs, it is not the only choice. Among baby boomers, the living trust is fast gaining popularity. The reasons baby boomers are choosing a revocable living trust over a simple will are varied, but the primary reason may be to avoid the probate process. In fact, living trusts offer many before and after-death advantages. Five things you should definitely know about a living trust include the following:
- What is a living trust, and is it revocable? A living trust is a written document created by an estate planning attorney, which can be funded during your lifetime. A living trust is revocable because so long as you are mentally competent, you are allowed to make changes or even dissolve the trust any time you choose. You reserve the right to amend the trust, revoke the trust, alter the trust or change the trustee however you please. While the trust is the legal owner of it’s assets, the IRS treats you as the owner because you have not given up asset control.
- Why would I choose a living trust over a will? Both a will and a living trust contain your instructions as to who will get what when you die. The difference is that a will needs to go through a Probate Court process before the contents can be distributed to the intended beneficiaries.
Probate can be time-consuming while a living trust allows assets to be transferred immediately after death to intended beneficiaries. Most living trusts also have provisions in the event of incapacitation. This means if you become physically or mentally disabled, the successor trustee you have named will continue to manage the assets in the trust in accordance to the terms you have established. It is important to remember that, just like a will, a living trust can be challenged by someone you left out as a beneficiary.
Those who prefer a little more privacy may also want to choose a living trust. When a will goes through probate anyone can go to the court and access the contents since probate records are open to the public.
- Who are trustees in the living trust? Any person, so long as they are mentally competent and an adult, can be named as trustee of your revocable living trust. Most people will name themselves and/or a spouse as trustees in order to retain full control of assets while alive. A successor trustee will gain control of the estate when the trustee dies or becomes too ill or disabled to manage the property and assets.
- How much money do need to fund my living trust? A living trust can be funded with $1 or as many of your assets as you choose. Some people specify the living trust will be funded on their death. It is important to speak to a Virginia estate planning attorney to understand how to fund your living trust based on your specific needs and concerns.
- What if I want to make changes? There is never a problem making changes to your revocable living trust. You simply visit with your estate planning attorney as your assets change, adding or deleting property and investments as you see fit. If you created a shared trust with a spouse, either of you can revoke it; however, if you want to change the trust provisions (such as the beneficiary or successor trustee) both of you must agree in writing. Both spouses will likely be required to consent to the transfer of real estate out of the living trust as well. In the case of a shared trust, when one spouse dies the surviving spouse may amend only the terms of the trust which deal with his or her property but cannot change the parts which state what happens to the deceased spouse’s property.
Whether you have a large number of assets or not, you may want to consider a revocable living trust as an alternative to a will. Speak to a knowledgeable Virginia estate planning attorney to determine the right choice for you.