Revocable Living Trusts
A revocable living trust is a theoretical box that you own and control. It allows you to store all of your assets into one organized box and continue living your life exactly as you had before. It is on standby waiting until you become incapacitated or pass away. When you become incapacitated, it allows your trustee to manage your affairs without interference from the court or government. When you die, it allows your trustee to wrap up your affair without going through probate. While trusts are typically more expensive to set up, the savings on legal fees during disability and death make it a significantly cost-effective plan.
A revocable living trust is a legal document where you appoint an individual to manage your money and property should you become incapacitated, and then distribute same to your family at your death. It is usually preferable to a will because it is designed to avoid the time, expense, and publicity of probate, which a will cannot avoid. While you are alive and of sound mind, you will be in control of your trust.
The revocable living trust does not need special tax treatment so long as the creator of the trust is the controller (or “trustee”). Any income generated by assets held in the trust are reported on the trustee’s 1040 tax form.
A revocable living trust is “revocable,” in that you can change the trust and take funds out. In most instances, you serve as the controller (or “trustee”) of the trust. If designed and funded correctly, a revocable living trust will completely replace your will and escape probate. Most attorneys will set up your trust, but never go the extra step in helping you fund it. If you never fund your trust, it will not work as intended. We have reviewed countless trusts created by highbrow attorneys that were never funded. Unlike most law firms, we will guide you through the funding process. We want your plan to work as intended. That is the whole reason why you are taking your time and resources to set this up in the first place!
If moving real estate into the trust, it is important to tell your lawyer whether or not the property is encumbered by a mortgage. Moving a mortgage-encumbered property into a trust might trigger the due-on-sale clause, but an experienced trusts and estates attorney can navigate and avoid this issue for you.
8 reasons why a revocable trust might be a good fit instead of a will.
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