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REVOCABLE LIVING TRUST
FREQUENTLY ASKED QUESTIONS
WHAT IS A TRUST?
A trust is an agreement regarding the management of assets. There are
many different kinds of trusts. For instance, there are charitable
trusts, life insurance trusts, education trusts, etc. The most commonly
used trust and the one that most people are thinking of when they refer
to a trust is a revocable living trust.
WHAT IS THE GOAL OF A REVOCABLE LIVING TRUST?
Every trust is created to accomplish a goal. The purpose of a revocable
living trust is to avoid probate, an issue we all have to face. That is
why it is the most common type of trust.
HOW IS A TRUST AGREEMENT STRUCTURED?
All trusts have a trustor, a trustee and at least one beneficiary. They
can all be the same person or they can be three different people,
depending on the purpose of the trust.
WHAT IS THE ROLE OF THE TRUSTOR?
The trustor is the person whose goals drive the design of the trust. The
trustor signs the trust agreement to create the trust. The trustor
transfers the assets he wants the trust to control to the trust. For
instance, he may sign a deed covering his home for purposes of
transferring ownership of the home to the trust. He may also decide to
have the trust own his investments (or any other assets) in which case
those assets will no longer be in his name but will be titled in the
name of the trust.
WHAT IS THE ROLE OF THE TRUSTEE?
The trustee’s job is to follow the plan the trustor has built into his
trust agreement. Often the trustor of a revocable living trust is also
the initial trustee.
WHAT IS THE ROLE OF THE BENEFICIARY?
The beneficiary has the best job. The beneficiary gets the benefits of
the assets in the trust, i.e., usually the income from the investments
and the right to live in the home held by the trust, etc. With a
revocable living trust, the trustor is also the first beneficiary of the
trust.
HOW DOES A REVOCABLE LIVING TRUST AVOID PROBATE?
A probate is needed if you hold title to assets in your name at death
that need to be passed to your heirs. If you create a revocable living
trust and transfer ownership of all your assets to the trust, you do not
own anything in your name that requires a probate.
IF I HAVE A REVOCABLE LIVING TRUST, HOW DO MY ASSETS GET TO MY HEIRS?
When you design your revocable living trust, you include instructions in
the trust to the trustee about what to do with the assets held in the
trust’s name on your death. In this way it is similar to your will,
i.e., it gives instructions on what is to happen to your assets after
your death. However, the implementation of your will is supervised by
the court. That is the probate process. With a revocable living trust,
you rely on your successor trustee to follow your instructions in the
trust without anyone supervising that he does what you have directed.
ARE THERE OTHER WAYS TO AVOID PROBATE?
In Washington, often the easiest way for a married couple to avoid
probate is with a community property agreement. Sometimes right of
survivorship designations or life estate deeds are an appropriate
alternative.
SO, WHAT LEGAL DOCUMENTS SHOULD I USE?
The best thing to do is to review your goals, your assets and your
family’s situation with a knowledgeable estate planning attorney to
identify the simplest legal technique to achieve your goals.
Elizabeth A. Perry has been helping Clark County residents with their estate planning and probate needs since 1976. She is a frequent seminar speaker. Her practice emphasizes probate, Medicaid issues, wills, trusts, incapacity issues and durable powers of attorney. Phone: (360) 816-2485 Fax: (360) 816-2486
(The above should not be construed as specific legal advice and is
intended for general information purposes only.) |
