A revocable living trust is a trust that is created and funded during one’s lifetime. Such a trust is essentially a tax neutral document; it uses an individual’s personal tax identification number during the lifetime of the creator—or settlor—and upon his or her death, the trust is assigned its own tax identification number. Thereafter, any income that is accrued after the settlor’s death is reported on a fiduciary income tax return.
If you are considering a living trust for your estate, consider speaking with a Virginia trusts lawyer to learn the benefits and disadvantages of a living trust on your life, assets, and family.
Benefits of a Living Trust
The benefit of using a revocable living trust is that there is no delay in opening an estate. This is because, if the named successor trustee is willing and able to step into the role of the successor trustee, can, in most cases, act automatically without court approval.
A revocable living trust is called revocable because, in most cases, the trust document reserves the right for the settlor to change, amend, or revoke the trust, in part or in whole. The trust document also generally reserves the right for the seller to put assets into or take assets out of the trust during his or her lifetime, while he or she maintains the requisite capacity to make such changes.
A common misunderstanding about a revocable living trust is that the creation trust of the trust alone is not sufficient to manage all of an individual’s assets. The trust does require funding during the creator’s or settlor’s lifetime, meaning that stock, bonds, broker’s accounts, and bank accounts must be re-titled into the name of the trust, and any real estate re-deeded into the name of the trust, in order for the terms of the trust to be applicable.
Probate & Living Trust
A revocable living trust is one way that probate is avoided. Often, assets that have been pre-funded into a revocable living trust during the initial settlor or creator’s lifetime avoids the necessity of probate as such assets pass upon the death of the creator pursuant to the terms of the trust and do not, in most cases, require court supervision.
A revocable living trust is a very common means by which individuals avoid probate. Assets that have been pre-funded into a revocable living trust often avoid the probate process and are distributed at the death of the settlor, pursuant to the terms of the trust, or are kept in trust. Generally, the terms of the trust detail this process and name any beneficiaries.