Revocable living trust
A revocable living trust is a vehicle by which property is managed during life and distributed after death. With a trust, the actual owner of the property being managed and distributed is not the individual, but the trust itself. Once a person transfers ownership of his or her property to a trust, the trust is considered “funded.”
A “living trust” means the trust is funded during the life of the original owner of the property. A person can also create a “testamentary trust,” which is funded after death. “Revocable” means that the person who funded the trust can take property back out again, and can revoke the trust altogether during his or her lifetime.
The person forming and funding a revocable living trust is referred to as the “settlor.” Once the property is transferred to the trust, the property is managed by a “trustee,” who is often also the settlor, as long as the settlor has the capacity to act as the trustee. The trustee holds, manages, and may use the trust property for the settlor. This way, the settlor generally has the full benefit of all of the trust property during the settlor’s lifetime.
If the settlor becomes unable to act as his or her own trustee, the successor trustee will be appointed in the trust document. Upon the settlor’s death, the property is held for the benefit of other people, called the “beneficiaries.” Depending upon what the trust document says, the property may be distributed right away, or it may be held and managed by the trust for the benefit of the beneficiaries for a period of time.
A person who has a revocable living trust should also have a “pour-over” will. This type of will directs any property that the settlor did not put into the trust during his or her lifetime be put into the trust at the time of death, so that it can be managed and distributed according to the trust terms.
Living trust scams
There are often misleading claims made about revocable living trusts. In fact, the marketing of revocable living trusts using misleading claims and representations has caused the Attorney General of the State of Colorado to issue a warning regarding living trust scams. Before making the decision to have a revocable living trust, check with a qualified estate planning professional.
When a revocable living trust is helpful
If a property owner is inexperienced in dealing with assets, or if he or she becomes incapacitated during life, a revocable living trust may be helpful. The owner of the property can name another person trustee of the property, and that person can manage the trust assets. No court intervention is necessary. Trust assets will be managed for the benefit of the settlor and beneficiaries.
Some people place assets into a revocable trust for privacy reasons. A revocable living trust document is not filed with the probate court, so it is not a public record. On the other hand, if a person must have a conservator appointed, or if a person dies with a probate estate, the assets of that person will be fully disclosed to the court, and will be public record.
Finally, a revocable living trust is appropriate if a person owns real property in more than one state. If ownership of such real property is not placed into a trust, it will be necessary to undergo the probate process in all states where real property is owned. This can be more expensive than the management of a trust.