From Our “Ask a Question” mailbag: “What is a Revocable Living Trust?”
Most recently updated on June 8th, 2018.
What is a Revocable Living Trust? Picture by Brooke Lark.
What is a Revocable Living Trust?
A revocable living trust is a trust created during lifetime over which the grantor reserves the right to terminate, revoke, modify, or amend. These trusts are generally used to avoid probate, provide assistance to a parent who needs help managing assets. Alternatively, they are also used to address family situations, provide privacy, and provide for the orderly administration of assets after your death. During your lifetime, the trustee uses any assets in the revocable trust for your care. Because the trust is revocable the assets in the trust are still available to your creditors and are part of your taxable estate. But, they are not part of your probate estate.
Revocable living trusts are called “will substitutes” because they help avoid probate. The trust accomplishes all the tasks that a will would normally perform. Even though a perfectly executed revocable living trust might be a will substitute, an estate plan using a revocable living trust includes a pour-over will. A pour-over will name an executor and instructs the executor to gather any assets that you owned at your death but did not place into the revocable living during your lifetime. At your death the will terms “pour” them into the trust.
For example, let’s say that during your lifetime you moved all your Atlantic County real estate into the revocable trust. Further, you named the trust as the payable-on-death beneficiary of your bank accounts. Unfortunately, just before you died, you purchased a CD at the bank but forgot to name the revocable trust as the beneficiary. At your death, your successor trustee takes over control of the revocable trust. As stated, the trust already owns the Atlantic County house. The successor trustee collects the payable-on-death bank accounts using your death certificate. But, the trustee is unable to collect the CD as it is in your name and does not name the revocable trust as beneficiary. To collect the CD, your executor must file the will and open the probate process.
Do I Still Need a Will?
Another need for a will, even if you have a revocable living trust, is to pursue lawsuits. If you die because a car hit you, the successor trustee of your revocable living trust will not be able to bring a claim for wrongful death in the Atlantic County court system. Instead, your executor will file your will, be recognized by the Atlantic County Surrogate as the fiduciary of your estate. Using that power, the executor can bring a suit against the driver of the car who harmed you. After the suit, any money obtained will then “pour” into the revocable living trust.
Who Serves as Trustee?
Normally, during your lifetime you will remain as the only trustee of the revocable living trust. If the time comes when you need some help managing your investments, you can name a co-trustee. The Co-trustee can also have the power to manage the trust for your benefit alongside yourself. If you don’t like how the trustee is managing the trust, you can always remove and replace him with someone else.
Name a Successor Trustee.
You should also name a successor trustee for yourself, to take over if you are incapacitated or passed away. This person will then step in, manage the trust for your benefit during your lifetime and after your death. The successor must follow the trust terms just as if the revocable living trust was your will and the successor trustee was executor. The difference being that the revocable trust manages without involving the Atlantic County Surrogate.
Revocable Becomes Irrevocable.
When you become incapacitated or die, the trust’s terms become irrevocable. You are the only person with the right to modify the trust terms.
A revocable living trust might fit well with your estate plan. Consult with an estate-planning attorney familiar with Atlantic County, New Jersey rules to review the options that best fit your needs.
More Planning Questions?
If you have more estate planning questions, please read my more detailed article, Revocable Trusts, Everything You Need to Know.
In Conclusion: What is a Revocable Living Trust.
In this article, I tried to answer the question, What is a Revocable Living Trust. Further, I included links to even more detailed information on my website. So, let me know how I did, comments and questions are welcome! I hope it helped!
If you have more questions about wills and estate planning, let our Estate Planning Lawyers help walk you through the confusing process. Our lawyers are ready to answer your questions. Feel free to contact our office for a free consultation.
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