A revocable living trust (RLT) is an estate planning tool that allows you to avoid the probate process while maintaining total control for yourself and your loved ones. Therefore, no newspaper notices or letters to heirs are required, no records become public, there are no court restraints on the distribution of assets, and no statutory waiting periods apply.
It is still necessary to determine what assets exist, to pay creditors, to file required tax returns and to distribute assets to beneficiaries, but avoiding court proceedings and requirements simplifies and expedites the process, and saves your loved ones the expense and delays usually associated with probate.
If you die leaving no joint owner or contractual beneficiary of your property, your estate will have to go through probate. In order for a living trust to avoid probate, ownership of assets is transferred to the trustees (managers) of the trust. Instead of owning property as Mark and Mary Welby, the name on the deed, account, security or other asset is changed to “Mark and Mary Welby, trustees, or their successor trustees, under the Welby Living Trust dated ____ .” This process is called “funding.” Proper and complete funding of your living trust is crucial to successfully avoiding probate.
Once transferred, the trustees of the trust own the property. You and your spouse, as trustees of the trust, have total control over all property just as you did before. You can spend money, mortgage, sell or give away assets, or do anything you would do if the trust did not exist. Since the trust owns the property and it is physically impossible for the trust to die, the owner of the property never dies and probate is never required. When either you or your spouse dies, probate is avoided and the trust is settled according to the guidelines and blueprints you’ve had your attorney draft in the trust.
Upon the death of the survivor of you, no probate is required since the trust is still the legal owner of the property. According to the provisions of the trust agreement, when both spouses die, the party you have named as successor trustee will have the power to distribute the property of the trust according to the terms provided in the trust. The successor trustee is typically the same person or institution who would be named as personal representative in a will. This should be someone who is capable of completing paperwork, who is responsible with money, and who can get along with the named beneficiaries. The successor trustee can be one of the named beneficiaries, any other individual, or a bank or trust department. You can also name two successor trustees, such as a trusted family member and a bank trust department, and the two will work together as co-trustees. If, during lifetime, the original owners of the property decide that they prefer to have someone else manage assets, the role of primary trustee of their trust can be given to anyone they choose. If both spouses agree that only one spouse should have management rights on some or all assets, the trust agreement can provide for management by one spouse only.
A living trust works well for either married or single people. Joint trusts may be used, where joint tenancy would typically be used, but where probate avoidance on both estates is desired. In cases where married couples choose to keep their assets separate, such as when spouses have children from previous marriages, we usually have each spouse execute a separate living trust, with the plan of distribution of each spouse outlined in that spouse’s trust.