A revocable trust, also known as a living trust, provides flexibility and probate protection when estate planning. Here, Douglas C. Lauenstein, estate planning attorney, explains what you need to know about creating a revocable trust.
What Makes a Revocable Trust “Living?”
A revocable trust is commonly known as a living trust and may also be referred to as an “inter vivos” trust. They are referred to as revocable due to the changeable nature of the trust: a revocable trust can be altered as your circumstances or desires change. These trusts are also known as living trusts because they are created while the trust maker is alive.
How Can Revocable Trusts Help in Estate Planning?
Revocable trusts are mainly advantageous in helping your family avoid the probate process. Since Maryland does not follow the Uniform Probate Code, probate can be a very complex process in this state. Avoiding the probate process will help your loved ones handle your estate in a faster, more efficient manner.
A specific type of revocable trust, known as an AB trust, also has the added benefit of reducing the estate tax burden of your estate. These trusts are more complicated than a standard living trust and are best suited for those with an extensive amount of assets to protect. Note that in 2018, under The Tax Cuts and Jobs Act, the estate tax threshold was increased to $11 million, exempting the vast majority of estates from the tax burden. It is best to speak to an experienced estate planning attorney—such as Douglas C. Lauenstein—if you are interested in creating an AB trust.
How Does a Revocable Trust Work?
A revocable trust is a written legal document that grants assets owned by the maker of the trust who is called the settlor or grantor. The settlor transfers assets to a trustee who holds the assets for the benefit of the recipient of the benefits of the trust called the beneficiary. A revocable trust must be signed by the settlor and properly witnessed. The trust must also fund the trust with assets. The assets may include real estate, vehicles, land, fine jewelry, artwork, cash or more. For titled property, such as real estate, the title must be redrafted in the name of the trustee to hold the asset in trust. The document should identify both the trustee and the name of the trust.
Do I Need to Draft a Will When I Create a Revocable Trust?
Although a revocable trust can protect much of your estate from probate, it is always wise to have a will that covers any assets not included within the trust. Many times a will called a pour over will is prepared with a revocable trust. A pour over will is prepared to pour over into the trust any assets that were not put in the trust by the settlor during their lifetime. A will also allows you to name guardians for minor children, guardians for minor children’s property, an executor and provide instructions on how to pay taxes and debts. Creating a will along with your trust will serve as additional protection to make the probate process as simple as possible. Douglas C. Lauenstein has been helping families protect their assets through trusts, wills and other estate planning tools for years. If you or a loved one would like to get started in the estate planning process with a revocable trust or will, contact him today and schedule a consultation.