Revocable Living Trust
What is a Revocable Living Trust?
A Revocable Living Trust (“RLT”) is a contract between the trustor and trustee, under which the trustee holds and manages property for the benefit of the beneficiaries. It is an estate planning tool to manage your assets and ensure they are eventually distributed to your chosen beneficiaries.
Who are the Key Players Involved in a Trust?
Trustor: person or persons who creates the trust agreement
Trustee: the person or persons who are responsible for carrying out the instructions set out in a trust agreement (oftentimes the same person who created the trust)
Successor trustee: person or persons who step in when the original trustee is unable to serve
Beneficiary: person or persons who are to benefit under the terms of the agreement
Benefits to Having a Revocable Living Trust over a Will
There are some reasons why having a RLT may make sense over using a will for your estate plan.
If your RLT is properly funded, your family members will avoid probate. If your estate is over approximately $60,000 in Colorado, your family members will have to go through probate, even if a properly drafted will is created. Many people want their family members to avoid the legal fees of probate, if at all possible.
Provides for Incapacity:
With a RLT, you are able to provide for the possibility of being incapacitated. Even with a Power of Attorney, many financial institutions will not honor these documents and you may experience difficulty making financial decisions without a living trust. Because your assets will be managed in the trust, and all trustees can make decisions, you can provide for the incapacity of a trustor. The capable trustees will be able to make decisions seamlessly in the event a trustor is incapacitated.
Avoid Multiple Probate Cases
In the event that you own property in multiple states, it makes sense to have a RLT. If you just have a will, a probate case will have to be opened in each state where you own real estate. By creating an RLT, you will be able to avoid multiple probates in different states, saving your family from the financial burden and time it will take to probate your estate. Furthermore, while Colorado has one of the better probate systems in the country, other states where your property is located, may not.
Probate cases are a matter of public record. Many individuals want to keep their estate private, and not a matter that can be reviewed by anyone in the public.
Funding the Revocable Living Trust
If you are going to go to the effort to create a revocable living trust, it is important to make sure it is properly funded. If you own a home, you will need to ensure that it is deeded to the trust so that the trust is managing it. You need to make sure other accounts and property are also owned by the trust. Consult with an attorney as to how to properly fund your trust.
Although a RLT is more expensive to create than a will, your beneficiaries will save money by not having to open a probate case. The cost is either on the front end or the back end, but please be aware that in the long run a RLT may not be more expensive than a will.
I Would Have to Give Up Control of My Assets
If you act as the trustee in addition to the trustor, as most people chose to do so, you will not give up control of your assets and will be able to the same things with your property as if you did not have a trust. Also, because the trust is revocable, you have the ability at anytime to terminate the trust if you want to.
Provides Creditor Protection
A Living Trust is not a device to protect your property from creditors. There are other estate planning tools that may protect your property from creditors, but not with the revocable living trust.