Legal Nature of
Revocable Living Trust

PLEASE READ HELPFUL INFORMATION TO BETTER UNDERSTAND THE LEGAL NATURE OF LIVING TRUST (AS YOUR MECHANISM OF SMART ESTATE PLANNING)

How does the Revocable Living Trust Work?

Example 1. You and your spouse, as a married couple, can provide in a revocable living trust agreement that all or part of your assets are declared to be held by you as Co-Trustees, for your benefit during your lifetimes, and upon death of either of you will go to the surviving spouse, or in the event of simultaneous deaths will go directly to designated beneficiaries. Immediately upon the death of either spouse, all legal interest in all the property automatically reverts to the surviving spouse, as sole trustee, free and clear from any probate processes or other court delays. The surviving spouse then has the option to place the assets in another revocable trust with an adult child or other family member as Co-Trustee and avoid probate again and again.

Example 2. You, as a single unmarried person, as grantor, provide in a revocable living trust agreement that all or a part of your assets are declared to be held by yourself and a third party as Co-Trustees, for the benefit of you as the grantor during your lifetime, and upon your death, to go to the beneficiaries designated in the agreement. Immediately upon your death, all legal interest in all property automatically reverts to the Co-Trustee, as the sole trustee, to be transferred as directed by you as the grantor in the agreement. If the beneficiary is an adult, he or she could be the Co-Trustee, and upon your death, he or she would automatically have title to the property for himself or herself.

Note that although trusts can avoid probate, they do not altogether avoid estate or gift
taxes, and a trustee must file an income tax return for the trust and pay the tax on its
taxable income unless the income is passed through to the beneficiaries - which is usually the case with the Revocable Living Trust.

Note finally that if the trust agreement is recorded, its revocation must also be recorded. However, no lawyers, judges, or lengthy court proceedings are needed to revoke a living trust. The trust may also be amended easily at any time during the lifetimes of the founders. In fact, as family circumstances change, the trust SHOULD be amended to reflect changes.

The grantor is in complete control of the property and it can remain a private matter, since it is kept out of the hands of the probate lawyers.

FREQUENTLY ASKED QUESTIONS

• Is it expensive to create a living trust?
• What steps are taken after drafting the
  living trust?
• How does a living trust avoid probate?
• Who is included in a living trust?
• Is a living trust document ever made public, like a last will?
• How an AB Living Trust works?
• Read all

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