At the Piatchek Law Firm, attorney Joseph J. Piatchek helps clients navigate the estate planning process, and a revocable living trust is often at the center of a client’s estate plan. Revocable living trusts are one of the most flexible and versatile estate planning tools and can be used for many purposes, including probate avoidance and privacy. They also allow the creator to centralize control of the estate’s assets if he or she becomes incapacitated. Revocable living trusts are not just for the elderly and wealthy; clients of all ages and stations in life set up revocable living trusts every day.
Our attorneys can work closely with you to establish a revocable living trust that addresses your unique needs and goals. We are also available to help you follow through with the actions you need to take after your trust is established, including funding the trust with your assets to ensure probate avoidance.
What Is the Difference Between a Will and a Revocable Living Trust?
A question we get every day at our firm is, “What is the difference between a will and a trust?” There are many different types of trusts, and a discussion of all the different types would be lengthy. A client could be talking about revocable trusts, irrevocable trusts, asset protections trusts, special needs trusts, testamentary trusts, etc. However, in our experience, most people are asking about what is technically referred to as a “revocable living trust.”
To understand what a revocable living trust is, let’s break down the term. Revocable means that the trust can typically be changed, amended, or totally revoked during the lifetime of the person(s) who created the trust. This means that the creator of the trust has maximum flexibility to do what they want. Living means that the trust is established during the lifetime of the creator. Finally, a trust is a separate legal entity that can own property and is controlled by a trustee.
Therefore, a “revocable living trust” is a separate entity created during the lifetime of the creator that can be changed, amended, or revoked while the creator is still living. A single person can create a revocable living trust or a married couple can create a joint revocable living trust. Technically, any two persons (married or not) can create a joint revocable living trust, but unmarried parties creating such a trust would have to discuss many special considerations when doing so. For more information on this topic, please see our page “Estate Planning for Non-Traditional Families.”
How Does a Revocable Living Trust Avoid Probate?
One of the main reasons that a revocable living trust is created is for probate avoidance. If a person passes away and still has assets or property titled into their own name, it becomes necessary to involve the probate court, because these assets are “stuck” in that deceased person’s name. A revocable living trust can be created in order to totally bypass the probate court process and ensure that nothing is still titled in your name after you die. If you set up a revocable living trust and correctly title assets in the name of that revocable living trust, those assets won’t still be owned by you after you die. Instead, the assets will be owned by the trust upon your death.
To give a simple example, imagine a single man who owns a home, a car, and a bank account. All three assets are titled into his name only. Tomorrow he passes away. The day after his death, all three assets are still titled into his name. At this point, a dead man owns a home, a car, and a bank account. Another way to think about this is that these three assets are “stuck” in the name of this deceased man. The assets will stay stuck that way forever until someone with an interest in the assets (such as an heir or family member) comes forward and takes action with the probate court. During the probate process, the items will become “unstuck” from the name of the deceased and into the name(s) of the legal heirs.
A revocable living trust avoids this whole process. Let’s take another look at the example above with the single man and his three assets. Instead of owning these items in his own name, let’s say the man comes to the Piatchek Law Firm office and sets up a revocable living trust. The trust states that the man is in charge of the trust as long as he is alive. It also states who will be in charge of the trust in the event of his incapacity or death. Finally, it states how the assets will be managed if the man dies or becomes incapacitated, and it also names his beneficiaries. After his death, because he did not own his assets (the trust owned them), the items will not have to go through probate. However, in order for this to work properly, his assets must be correctly titled into the name of the trust, which is commonly referred to as “funding the trust.”
Funding a Revocable Living Trust: Transferring Assets
Once the man creates his trust, we will help him “fund” it by transferring the three assets he owns to the trust. We create a deed to transfer the home: from himself, to himself, as trustee of the new trust. Then, we set up a “transfer-on-death” (TOD) designation on the title to his car, naming the trustee of the trust as the owner of the car in the event of his death. Finally, we set up a “payable-on-death” (POD) designation on the bank account, naming the trustee of the trust as owner of the account in the event of his death.
At this point, the trust if fully “funded,” and if the man passes away, there will be nothing still titled into his own name after his death. Therefore, nothing will be “stuck” in his name if he dies, and no probate should be necessary.
Contact Us for Expert Advice
At the Piatchek Law Firm, we can help you avoid the common mistakes and pitfalls that can easily occur when creating an estate plan. We can answer your questions, explain how the process works, and ensure that the many rules and formalities required to draft a valid revocable living trust are correctly followed. In most cases, one of our attorneys can complete these services for a reasonable flat fee. To get started, please call us at 417-882-5858 to schedule a free initial consultation. We may be available for evening and weekend appointments, and we can also arrange a home visit if you are unable to travel to our offices.