Perhaps the most common type of trust is the revocable living trust. As the name implies, revocable trusts are fully revocable at the request of the trust maker. Thus, assets transferred (or ‘funded’) to a revocable trust remain within the control of the trust maker; the trust maker (or trust makers if it is a joint revocable trust) can simply revoke the trust and have the assets returned. Revocable trusts can be excellent vehicles for disability planning, privacy, and probate avoidance.
Here is a little more about revocable living trusts.
Any trust is really just an agreement. It is also a relationship. There are always three persons involved in the trust. First there is the trust maker, also referred to as the grantor. Second, there is the Trustee. The trustee becomes the legal owner of the property in the trust. Third there is the beneficiary. The beneficiary as the name implies gets the benefits of the trust.
Why is this an estate planning tool?
Here is where the revocable living trusts is used as one of the big estate planning tools. One person can be all three grantor, trustee and beneficiary. The grantor can put property in trust, name herself as the trustee, and be the beneficiary at the same time. The grantor retains the power to amend or completely revoke the trust. There is the revocable living trust in a nutshell.
So how does this work as an estate planning tool?
When the person who makes the trust, the grantor or the trust maker, for any stated reason in the trust agreement, no longer wants to manage the property the successor trustee takes over. So you put property in a trust. You then define the times when the next person in line is to take over your duties as trustee. You say “If I become disabled for any reason, my son takes over management of the property in the trust” if you become disabled as defined in the agreement, your son takes over. He has agreed to manage your property and he is required by the agreement to serve you with the highest duty of care the law allows.
What happens when you die with a trust?
In most cases the trust is no longer revocable (we can build in ways to preserve flexibility) and the property is managed by the pre-selected trustee in any way defined by the agreement. You are the one who decides what goes in the agreement.
Why would you want to do this?
There is no court involvement for any of the property put in the trust before you die. You avoid probate. Everything stays private. No one but the beneficiary and the trustee is entitled to know your plans. You decide how to preserve your legacy, encourage and support your loved ones, offer your advice and financial support. Your lasting legacy, your loving instructions and your privacy as well as the privacy of your family is preserved because the is not public probate.
Is this expensive?
No. A revocable living trust will really have the same provisions your will would have. The big difference is making sure all the property is properly titled in to the trust. A revocable living trust based estate plan should cost about the same as a properly drawn will.
Call Rick Mickelson: 605-334-9448
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Office location: 300 N. Dakota Ave, Ste 603, Sioux Falls, South Dakota