REVOCABLE LIVING TRUST - FAQ
WHAT IS A TRUST?
A trust is an agreement regarding the management of assets. There are many
different kinds of trusts. For instance, there are charitable trusts, life
insurance trusts, education trusts, etc. The most commonly used trust and
the one that most people are thinking of when they refer to a trust is a
revocable living trust.
WHAT IS THE GOAL OF A REVOCABLE LIVING TRUST?
Every trust is created to accomplish a goal. The purpose of a revocable
living trust is to avoid probate, an issue we all have to face. That is why
it is the most common type of trust.
HOW IS A TRUST AGREEMENT STRUCTURED?
All trusts have a trustor, a trustee and at least one beneficiary. They can
all be the same person or they can be three different people, depending on
the purpose of the trust.
WHAT IS THE ROLE OF THE TRUSTOR?
The trustor is the person whose goals drive the design of the trust. The
trustor signs the trust agreement to create the trust. The trustor transfers
the assets he wants the trust to control to the trust. For instance, he may
sign a deed covering his home for purposes of transferring ownership of the
home to the trust. He may also decide to have the trust own his investments
(or any other assets) in which case those assets will no longer be in his
name but will be titled in the name of the trust.
WHAT IS THE ROLE OF THE TRUSTEE?
The trustee’s job is to follow the plan the trustor has built into his trust
agreement. Often the trustor of a revocable living trust is also the initial
trustee.
WHAT IS THE ROLE OF THE BENEFICIARY?
The beneficiary has the best job. The beneficiary gets the benefits of the
assets in the trust, i.e., usually the income from the investments and the
right to live in the home held by the trust, etc. With a revocable living
trust, the trustor is also the first beneficiary of the trust.
HOW DOES A REVOCABLE LIVING TRUST AVOID PROBATE?
A probate is needed if you hold title to assets in your name at death that
need to be passed to your heirs. If you create a revocable living trust and
transfer ownership of all your assets to the trust, you do not own anything
in your name that requires a probate.
IF I HAVE A REVOCABLE LIVING TRUST, HOW DO MY ASSETS GET TO MY HEIRS?
When you design your revocable living trust, you include instructions in the
trust to the trustee about what to do with the assets held in the trust’s
name on your death. In this way it is similar to your will, i.e., it gives
instructions on what is to happen to your assets after your death. However,
the implementation of your will is supervised by the court. That is the
probate process. With a revocable living trust, you rely on your successor
trustee to follow your instructions in the trust without anyone supervising
that he does what you have directed.
ARE THERE OTHER WAYS TO AVOID PROBATE?
In Washington, often the easiest way for a married couple to avoid probate
is with a community property agreement. Sometimes right of survivorship
designations or life estate deeds are an appropriate alternative.
SO, WHAT LEGAL DOCUMENTS SHOULD I USE?
The best thing to do is to review your goals, your assets and your family’s
situation with a knowledgeable estate planning attorney to identify the
simplest legal technique to achieve your goals.
Elizabeth A. Perry has been helping Clark County residents with their estate
planning and probate needs since 1976. She is a frequent seminar speaker.
Her practice emphasizes probate, Medicaid issues, wills, trusts, incapacity
issues, durable powers of attorney and guardianships. Phone: (360) 816-2485
Fax: (360) 816-2486 E-mail: liz.perry@landerholm.com
(The above should not be construed as specific legal advice and is intended
for general information purposes only.)
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