Our Kansas City Estate Planning Lawyers can help you decide if a Living Trust is right for you.
What is a Revocable Living Trust?
A Revocable Living Trust is a legal document that transfers ownership of property to a trustee. The trust has a set of instructions under which the trustee operates for the benefit of the beneficiary. A Trust can be as simple or as intricate as necessary to address your concerns and goals. It is important to receive reliable legal advice and well drafted documents when creating your estate plan.
People Involved in a Living Trust
Who is a settlor or trustmaker? This is the person who creates the trust and transfers property into the trust.
Who is a trustee? The trustee holds legal title to property in the trust and follows the trust instructions for the benefit of the beneficiaries of the trust. This is you during your lifetime while you are in good health. Many times, the person who is creating the living trust is also the trustee while they are in good health. The trustee can change to a trusted family member, friend, or a financial institution if you lack mental capacity or upon your passing.
Who is a beneficiary? A beneficiary is a person entitled to property or income from the trust. A beneficiary could be family, friends, or charities. Many times, the person who is creating the living trust is the beneficiary of the trust during their lifetime (you are the trustee and beneficiary). The beneficiaries of the trust will change over time as the settlors or trustmakers pass away.
Benefits of a Living Trust
Incapacity planning – the Trust will help protect you during your lifetime. Your backup trustee can step in once you no longer want to handle your finances and property or if your mental or physical health declines. The trustee can handle the property in the trust without relying on power of attorney documents, this results in a seamless transfer.
Flexibility – You can move property into and out of the Trust as you like. You have complete control of the assets in the Trust while you are alive and well. You can change or revoke the Trust.
Avoid probate – Property that has been transferred into the Trust will avoid probate court. Probate court is the process by which property is transferred under a Will or if a person died without a Will.
Three common reasons some people want to avoid probate court:
- Public A probate case is a public court case. If someone pulls up a probate case, they can review the Will filed with the court. The Will states who receives property. The public will know who received the property and how much was received. This is often worrisome for people with minor children.
- Costs A probate case can cost thousands of dollars once court fees, publication fees, attorney fees, and executor fees are paid. Many times, property estate planning to avoid probate will cost less than probate. Probate costs will reduce the amount of money that goes to the family. The costs of a probate case will increase if there is real estate, lots of accounts, family members that are hard to find, family disputes, or an executor needs more assistance during the process.
- Time A probate case is a court case, and that means it will take time. A probate case can easily take 6-12 months depending on when the Will is filed with the court. If real estate is involved it can take closer to 18 months to complete the transfer of assets and complete the probate process. During this time assets are not available to the family. This concerns parents with minor children who intend for assets to be available for their children’s care.
Smooth transfer of assets to the beneficiaries as no court process is required. The trustee will take the necessary steps to follow the Trust instructions to transfer the property.
Privacy is maintained since the Trust is a private document and only people with a direct interest in the Trust have the right to know of the assets in the Trust.
Protect beneficiaries’ inheritance from their creditors, divorce, bankruptcy, lawsuits, or people looking to take advantage of the family member or friend. A Trust can also ensure beneficiaries receiving public benefits do not lose their benefits. A Trust can also allow you to direct when beneficiaries receive property, such as once my child reaches 25 years old, they can receive their inheritance in full.
Tax planning – Trusts can assist with tax planning issues when estates reach the federal tax exclusion. Currently the exclusion is $13.61 million for an individual and $27.22 for married couples. These numbers are set to decrease in 2026 depending on the actions Congress takes.
What is Trust Funding?
Trust funding refers to the process of moving your assets into the Trust. You can move assets into the Trust by retitling the assets into the name of the Trust. Trust funding is a crucial step to achieving the benefits of a Living Trust.
Is a Living Trust Right for You?
Should a Revocable Living Trust be part of your estate plan? No simple guidelines exist to answer that question. People with various levels of wealth and in different circumstances may, or may not, find a Revocable Living Trust useful.
Allow the Estate Planning Attorneys at Walden & Pfannenstiel to help you determine the best approach for your individual needs by scheduling your virtual or phone meeting today.
Want to learn more? Join a webclass.