Revocable Living Trust
Revocable Living Trust
The revocable living trust (RLT) contains language to distribute assets at death, just like a will. Here, however, you set up a trust during your lifetime and transfer essentially all of your assets into the trust. These assets are then managed and controlled by you. Just like a will, the RLT can contain language to set up other trusts, should these be desired. The RLT has many advantages over a will: most notably, it allows you to avoid probate.
The RLT also has the advantage of being private: none of it is subject to public record. In addition, it is much harder to contest successfully. The disadvantage of RLTs is that they are more expensive to draft and more difficult to maintain than wills. Since the RLT is probably the lesser-known option, we include below a brief explanation of how the trust would work for a married couple.
Essentially, the revocable living trust works as follows:
An attorney prepares the trust. It contains language to direct, exactly as you desire, the disbursement of funds at the death of the second spouse.
Upon creation of the trust, ownership of all of your assets, except qualified retirement plans and life insurance policies, is generally transferred to the trust.
A simple will is prepared for both spouses, which at death merely transfers any assets to the trust that were previously overlooked. If estate taxes are a concern, the revocable living trust would also contain language to create a second trust called a bypass trust. This trust would not be funded initially, but could be funded at the death of the first spouse to reduce future estate taxes.
Both spouses would serve as trustees of the revocable living trust during their lifetimes, managing the estate. At the death of the first spouse, the surviving spouse would serve as sole trustee of the surviving revocable living trust, and could also serve as personal representative of the estate under the will.
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