Will I Still Have Control Over My Property If I Establish a Revocable Living Trust?

A Revocable Living Trust is one of the most flexible estate planning tools available. It can be the foundation on which an individual’s financial and estate plans are built. It offers many benefits and gives you control over the management and distribution of your assets during your lifetime and after your death.

What is a Revocable Living Trust?

A Trust is a legal entity that owns assets. It involves an agreement between you, as grantor, a trustee, and beneficiaries. When you set up a Revocable Living Trust, you transfer assets to a trustee to be held for the benefit of one or more beneficiaries. The Trustee invests, manages, and/or distributes the Trust’s assets based on the grantor’s instructions as set forth in the Trust document. The Trustee can be an individual or an institution such as a trust company or bank.

Often, you name yourself the trustee and beneficiary for your lifetime. By including testamentary provisions, the Trust can continue after your lifetime for the benefit of your spouse and/or children. This also helps to avoid the cost, time, and unwanted publicity of the Probate process.

How Does a Revocable Living Trust Give You Control?

You can be the grantor, trustee, and beneficiary of the Trust during your lifetime. By assuming all three roles, you maintain control over your assets during your lifetime. Not only that, but you, as the grantor, reserve the right in the Trust document to amend or revoke the Trust at any time during your lifetime. This enables you to revise the Trust (or even terminate the Trust) to take into account any change of circumstances such as marriage, divorce, death, disability or even a “change of mind.” It also affords you the peace of mind that you can “undo” what you have done.

To fund your Revocable Living Trust, you will need to re-title assets to transfer them into the Trust. You do that by changing the name on assets to the name of the trustee and re-registering securities into the trustee’s name. All current and future assets, such as bank accounts, titles, deeds, stocks, and mutual funds, should be in the trustee’s name, as Trustee, for the benefit of the Trust.

Once this is done, legally, you no longer own any of the assets in your Revocable Living Trust in your individual name. The Trustee, perhaps you, own them in the capacity as Trustee of the Trust. Your Trust now owns your assets. But, as the Trustee, you maintain complete control. While you are alive and mentally competent, you have complete control over your property. You can buy, sell, improve, spend, change investments, or give away property just as you would without a Trust.

Upon your death, the Trust becomes irrevocable so that no one can change your testamentary wishes. For married couples, the surviving spouse still has total control over his or her share of property after its transfer to the survivor’s Trust, and the Trust becomes irrevocable only as to the deceased spouse’s share.

Advantages of a Revocable Living Trust

One of the biggest advantages to setting up a Revocable Living Trust is the avoidance of Probate with respect to the assets titled in the name of the trust. Remember, Probate is the process of retitling the property of an individual upon their death. Upon your death, assuming that you have transferred all your assets to the Trust, there isn’t anything to Probate because the assets are held in the Trust. Therefore, properly established Revocable Living Trusts completely avoid Probate.

In addition to the savings in Probate expenses, the avoidance of Probate has other advantages:

  • The administration of a Revocable Living Trust at your death is normally a private matter between the Trustee and the beneficiaries. Unlike Probate, there are few public records to reveal the nature or amount of assets or the identity of any beneficiary.
  • Property often can be distributed to the beneficiaries shortly after your death, avoiding much of the delay encountered with the Probate process.
  • Probate court approval is not necessary to sell an asset in a Trust, thus avoiding further delay.
  • If you become physically or mentally incapacitated, property held in this Trust remains available to you without the requirement of a court supervised guardianship or conservatorship. The Successor Trustee named in the Trust document is given the ability to manage the assets in the Trust and pay your bills. The Successor Trustee can be a trusted relative or friend, or can be a professional Trustee such as a Trust company or a Trust department of a bank. Since a court or other independent third party does not ordinarily supervise the activities of the successor Trustee, the selection of the successor Trustee should be carefully considered.
  • If the beneficiaries of your Trust are minor children or others who might not choose wisely in the use of assets, the Trust can continue to hold the assets until they reach a more mature age.
  • If you own real property in more than one state you avoid the expense, time, and hassle of multiple Probate proceedings.
  • It is significantly more difficult to contest a Living Trust. When a Will is contested the assets are frozen and they cannot be distributed until the claim is resolved. Assets placed in a Living Trust are typically not frozen pending the outcome of a legal challenge.

The flexibility of a Revocable Living Trust is one of its main advantages, since it allows you to change your mind, make amendments, or end the Trust anytime you wish. You can add property to the Trust, transfer ownership of assets in the Trust back to yourself, add or remove beneficiaries, name a new Successor Trustee, and sell, give, or mortgage property owned by the Trust. And, of course, you can revoke the Trust at any time.

By creating a Revocable Living Trust, you can gain better control over what happens to your property and help protect your family. With good planning, you can name beneficiaries, potentially save thousands in estate taxes, and most importantly, you protect your heirs from the expense and inconvenience of Probate. As always, you should consult a qualified estate planning attorney before proceeding with any estate planning tool.

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