This report is for people who are considering planning by doing a Revocable Living Trust. This brief report will briefly explain how a Revocable Living Trust is typically set up. The primary benefit of this type of trust is that there is a LOT of flexibility. We have discussed some of the typical ways people set them up below, but you have a lot of options..
Revocable Living Trust
The reason this trust is referred to as “Revocable” is that you can revoke it at any time. Obviously after going through the time and expense of setting this up, you probably would not want to revoke it. But, it’s good to know that you can do so. The word “Living” refers to the fact that it is set up and made operational during your lifetime. You may hear this type of trust referred to as an “inter vivos” trust, which refers to the fact that it was created during your lifetime. This is different from a “Testamentary” trust, which is created by will, must go through probate and isn’t operational until after you die.
With a Revocable Living Trust, you are the Settlor (since you created it) AND you will probably also name yourself as Trustee (to manage your trust) while you are alive and competent.
If you are married and wish to have a joint married trust, you may do so. Husband and wife could equally own the assets and both could serve as co-trustees. When one dies or is incapacitated, the other could serve as trustee individually and act on behalf of the trust
Distribution at Death
With a Revocable Living Trust, you can name beneficiaries of the trust who will receive assets at your death. You can leave them specific assets (such as the farm to Johnny and the Rent House to Suzy) or you can leave assets equally, such as 50% to Johnny and 50% to Suzy. If either one of them die before you, their share can be distributed equally to their kids (or any way you wish).
You can also name specific persons to serve as successor trustees to serve on your behalf at your death or incapacity. Usually when the first spouse dies, the surviving spouse would serve as successor trustee. When the second one dies, many people appoint one of their children to serve as trustee. And yes, if you wish to have two (or more) children serve together as successor trustees, you can do so.
Again, the above statements of “what could be done” doesn’t mean that this is the way it is (or even the way it should be) in every trust. If you currently have a trust, it may be structured differently. As stated earlier, there is a lot of flexibility available when structuring a trust. The key of your Revocable Living Trust is to structure it right for you.
Next week we will discuss the probate process, which is often “the rest of the story” when planning with a Last Will & Testament. For many folks with fairly simple estates, the probate process may be “too much”. It’s like going fly hunting with a bazooka. If you have some assets, a few kids and don’t anticipate any problems, then a Revocable Living Trust may be for you.
We have covered some legal topics in this edition and as always, I want to emphasize that (1) the law is different in every state, so if you live in a state other than Arkansas, just know that the law may be totally different in your state; (2) your situation is unique, so one size doesn’t fit all – meaning what we discuss herein may not be right for you; (3) we have purposely over-simplified many of the topics above (otherwise this would be many pages long and unreadable because of all of the legalize). It is imperative that you meet with your attorney (hopefully us!) and get a plan that will work for you. Don’t try to plan based on what you read in this (or any) article AND don’t try to go it alone. Please consider this, get your questions answered and take action.
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