A revocable living trust in Virginia, also called a living trust or inter vivos, has become a popular estate planning option because of the many benefits it offers. A revocable living trust is flexible. The terms of the trust can be changed at any time, or the trust may be cancelled entirely. Currently, about 20% of Americans have living trusts as part of their estate plans. The benefits of a living trust help you avoid the costs of probate, preserve privacy, and offers ease of transition of your assets to your beneficiaries after you die.
What exactly is a Revocable Living Trust?
A living trust is a legal entity that holds the assets of the creator, known legally as the grantor, in a trust for his or her benefit during their lifetime. When creating the revocable trust you will need to name a trustee who has the responsibility of managing the trust assets. You can select anyone, but the most common practice is to name yourself so that you can maintain control of your estate while living. You will also need to choose a successor trustee to step in after your death or if you become incapacitated to continue trust management and distribute the trust assets to your beneficiaries at your death. The successor trustee can be a relative, friend or even an organization like a financial institution.
What are the benefits of a revocable trust?
Control of your estate: A living or revocable trust provides control of your estate, even after death by setting out a clear plan to deal with all of your assets. Although the assets are technically owned by the trust, you, as the trustee, continue to use them as you normally would. You live in your home and spend your money as you wish. After your death, your estate will be handled exactly as you wish since the assets stay in the trust until the dates you have chosen for distribution to your beneficiaries. You may choose specific ages for beneficiaries to inherit or even set up a monthly allowance or schedule. You can provide extended care for a loved one with special needs and protect specific assets from others. If, on the other hand, you pass your assets with a will, they are distributed once probate has concluded.
Avoids Probate: Probate is the court-supervised process of distributing a deceased person’s estate. Depending on the size and complexity of the estate, as well as the assets and the number of individuals involved, probate may become a lengthy and costly process which can delay distributions to your beneficiaries and decrease the amount that they inherit.
The Commonwealth of Virginia has not adopted the Uniform Probate Code, so its probate procedures are lengthy and may be complicated. A trust avoids all of this red tape and allows you to pass your assets to your beneficiaries immediately upon your death, if you wish, unlike a last will and testament which cannot distribute assets until probate has concluded. Probate may take months or even years to resolve. Distribution of a trust by the successor trustee may only take a matter of weeks.
The avoidance of probate may be particularly helpful if you own property in other states, like a vacation home, as it would pass directly to your beneficiary through the trust and not be subject to probate in another state.
A note about cost savings: Though there may be savings in probate costs, the initial up-front costs of setting up and funding a living trust can exceed those of a simple last will and testament. Also note that a revocable living trust does not protect your assets from federal estate tax, Medicaid spend down, or creditors.
If you become incapacitated: If you become ill or incapacitated and can no longer take care of your own financial affairs, the person you have chosen as successor trustee can step in without the intervention of a court. All of your assets are already owned, controlled, and managed by the trust. In this way, you can avoid a conservatorship proceeding.
Protects your privacy: A living trust protects your privacy since its terms, assets, and beneficiaries are never disclosed to the public. Unlike a will, a living trust is a private document between the parties involved, and does not become part of the public record. No one can later go and search public records to find out more about the distribution of your estate. On the other hand, a will is a public record, so everything in it becomes public as well. Avoiding the probate process will help protect your privacy.
You also need a “pour-over” will
Even if you have a revocable living trust, it is still very important to have a last will and testament. A pour-over will is a safety net. It simply states that any assets that have not been transferred into your revocable living trust should go there when you die. In other words, it names your trust as the beneficiary of any property that it does not already hold or that does not pass directly to a living beneficiary through other means, such as a beneficiary designation on a retirement account or life insurance policy. A pour-over will requires probate.
If you don’t include a pour-over will in your estate plan, any property, not funded by your living trust, will pass to your heirs according to Virginia intestacy law. This means that if you forget to fund your new vacation home into your trust and you don’t have a pour-over will, or any other type of will that directs the property to someone specific, the Commonwealth of Virginia will decide who inherits the home based on its laws.
In addition, if you have minor children, the pour-over will can also be used to name potential guardians. This is most important if you are a single parent or if your spouse is unable to provide the care your children will need.
About Northern Virginia Trusts & Estates
Northern Virginia Trusts & Estates provides affordable estate planning services for Virginia families. Our firm understands the intricacies of estate planning and offers a range of services from simple, a la carte pricing for single items to comprehensive offerings that cover a variety of preparations.
For more information about our estate planning services, trusts, wills, and our packages, contact our office today at 703.938.3510 or visit our website: www.NorthernVirginiaTrustsAndEstates.com