Do I need a trust?
CCHA hears this question often. There are many types of trusts, including but not limited to revocable trusts, irrevocable trusts, charitable trusts, disclaimer credit shelter trusts, special needs trusts and more. While trusts are not for everyone, a trust can be beneficial for some, depending upon the particular situation.
What is a trust?
A trust is a legal instrument that can hold title to assets and help your estate avoid probate at death. In order to avoid probate, the settlor must transfer his or her assets into the trust, if said assets do not have a designated beneficiary or joint owner. The settlor is the person who creates the trust.
What is a revocable trust?
A revocable trust is a flexible estate planning tool because the settlor of a revocable trust can amend or revoke the trust so long as the settlor is alive and competent.
The name of the trust can include any of the following words: “Living”, “Family”, “Revocable”. A revocable trust can be a joint trust with another person or each person can have their own individual trust.
The trustee of the trust is the person whose role is to administer the trust. The first trustee is typically the settlor. When the settlor serves as the trustee of a revocable trust, the taxes on the trust are not taxed to the trust. Rather, in that scenario, the trust is seen as a pass-through entity to the settlor for tax purposes.
A trust can have more than one trustee if the settlor designates multiple people to serve as trustee at the same time. It is recommended that a trust nominate successor trustees to take over when the initial trustee is unable to serve. Some trusts contemplate how to replace and remove a trustee.
A revocable trust can be modified or revoked entirely by the grantor during the grantor’s lifetime which makes this trust very flexible to use. A revocable trust is most beneficial to the grantor if it is funded during the grantor’s lifetime.
How do I fund a revocable trust?
Once your revocable trust has been signed, you are immediately able to fund the trust. In order to fund the trust, the settlor must title assets he or she owns to the name of the trust. Our estate planning attorneys can provide you with simple instructions on how to do this yourself. We are also happy to transfer your real estate into your trust via a deed.
A revocable trust is often established for the benefit of the settlor during the settlor’s lifetime. Upon the settlor’s death, the trust should name residuary beneficiaries to receive or benefit from the trust assets if they survive the settlor. It is a good practice to name contingent beneficiaries as well in case the residuary beneficiaries do not survive the settlor.
If after reading this blog you still aren’t sure whether a revocable trust is a good fit for you, we encourage you to contact our office and we will be happy to direct you to one of our estate planning experts.
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