How a Revocable Living Trust Works
Most have seen an ad for a Revocable Living Trust. You may have heard that it helps you avoid probate while still maintaining control of your assets. It may sound too good to be true, but it is not. In this article, we will go over how a Revocable Living Trust works and how one can benefit you.
The Set Up
The person setting up the trust is known as the Trustor or Grantor. As the Trustor, you have complete control over the trust provisions and how the trust is set up. As the Trustor, you name your beneficiaries, or who your assets are going to when you pass. You also set up the distribution provisions, or how you want the assets to be distributed to your beneficiaries. Your options regarding distributions are pretty much limitless.
You can choose an outright distribution, or to distribute the funds in increments. You choose to give a beneficiary cash or a certain item in your possession. Whatever you can imagine, a trust can carry it out. Additionally, you need to name a Successor Trustee. This will be the person who takes care of your affairs and distributes your trust after you are gone, they will take your place as the Initial Trustee.
Initial Trustee Powers
As the Initial Trustee, you maintain complete control of the trust and the funds held inside it. This means you can transfer property in or out of the trust at any time. Also, you can withdraw funds from the trust. Basically, you have the same powers as if everything was still in your name. You can also amend provisions whenever you want. You can even revoke, or get rid of, the trust if that is your desire. As the Initial Trustee, it is also your responsibility to fund the trust.
Funding Your Trust
For a trust to be effective, the assets you wish the trust to distribute must be titled in the name of the trust. Assets you may want to retitle include: real property, bank accounts, investment accounts, interest in a business, or cars. As you acquire new assets, you will want to make sure that they are also titled in the name of the trust. Otherwise, they may be subject to probate. Due to this, it is extremely important that all assets are titled correctly.
How a Trust Avoids Probate
How does a trust work for avoiding probate? When you set up a trust, you are creating an entity that is separate from yourself. This separate trust owns your property, instead of the property being in your name. Since a trust is an entity, it cannot die and it keeps in force even after you pass. When you pass, your Successor Trustee takes your place and will take care of the trust for you. All of this is done seamlessly and without any court involvement.
On the other hand, if you had your assets titled in your name when you pass a probate may be necessary. Probate is the process of getting an asset transferred out of your name and distributed to your heirs. Some are under the false impression that a Will can solve this problem. But a Will is simply a document that gives instructions regarding your probate. In most cases, the only way you can truly avoid probate is by utilizing a Revocable Living Trust.
Now that you understand how a Revocable Living Trust works, you may be wondering how to create your own. The best way to start is by meeting with a qualified professional. In Arizona, there are two different professionals who can help you, an Attorney or a Certified Legal Document Preparer. Depending on your circumstances, one might be better than the other for you. Do your research to find which is best for your situation. Once you find your professional they will be able to guide you through the trust creation process.
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