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Revocable Trusts: The Basics
Mar 07, 2021

Revocable trusts are a will substitute; they are an effective way to avoid probate and can provide for asset management in the event of incapacity.  In addition, revocable trusts—sometimes referred to as “living trusts” or “revocable living trusts”—are incredibly flexible and can achieve many other goals, including tax, long-term care, and asset-protection planning. 

A trust is a legal arrangement through which one person (a “trustee”) holds legal title to property for another person (the “beneficiary”).  As the creator of a revocable trust you would be referred to as the “grantor,” “settlor,” or the “donor.”  While you are alive, you are a beneficiary of the trust and can also serve as either the sole trustee or as one of a number of co-trustees.  The trustee manages the assets in the trust, which can include real estate, bank accounts, investments, and tangible property (such as fine art) under the terms set forth in the trust document. 

Whatever you place into trust during your life will pass to your beneficiaries at your death without going through probate, avoiding the cost, delay and publicity of probate.  In addition, in the event of incapacity, a co-trustee can step in and manage the trust property without any fuss.  While you can also accomplish this through a durable power of attorney, banks and other financial institutions are much more comfortable with trusts.  They have been known to reject durable powers of attorney that are more than a few years old or to require that the drafting attorney certify that the power of attorney has not been revoked. 

The secret to making revocable trusts work is to fund them.  This means retitling assets, whether real estate, bank accounts, or investment accounts, in the name of the trust.  All too often, attorneys draw up estate planning documents, advise clients to fund their trusts, and then nothing happens.  Trusts have no relation to assets that are not retitled.  However, executing a “pour-over” will along with your trust, saying that at your death all of your assets will be distributed to your trust, your wishes as to the ultimate distribution of your estate will be carried out.  You just won’t avoid probate and will not have as strong protection in case of incapacity. 

Your bank and or financial advisor can assist you with retitling your accounts into your trust.  Depending on the institution, you might be able to change the name on an existing account.  Otherwise you will need to open a new account in the name of the trust and then transfer the funds.  The financial institution will probably require a copy of the trust; however, if you prefer more privacy, many states require financial institutions to accept a certification of trust (a short document, typically signed by the trustee, that details the trust’s essential terms and certifies the trustee’s authority without revealing private details of the trust).  As long as you are serving as your own trustee or co-trustee, you can use your Social Security number for the trust.  If you are not a trustee, the trust will have to obtain a separate tax identification number and file a separate 1041 tax return each year.  You will still be taxed on all of the income and the trust will pay no separate tax.
 
You will need to execute a deed to transfer real estate into the trust.  If you intend to refinance your property or take out a line of credit, do so before deeding the real estate into your trust.  In most instances, banks and other lenders require that you remove the property from the trust and put it back in your name before signing any new mortgage papers.  Depending on your state, you might also need to redo a homestead declaration after transferring property into a revocable trust.

The following are some of the issues revocable trust documents cover, as well as decisions you might need to make:

  • When does the successor trustee take over?
  • How do you define the incapacity of a trustee?
  • What can the trust invest in?
  • May the trust pay the debts of your estate?
  • If there’s an absence of trustees for any reason and you are not available, who appoints the new trustee?  Do you want to require that new trustees have any particular qualifications?
  • Do you want to give anyone else the right to remove trustees?
  • What accounts or statements, if any, must the trustee provide to beneficiaries?
  • Do you want distributions to be made to beneficiaries under age 18, or just made on their behalf?  Would you prefer the trustee to continue managing the funds until your children or other beneficiaries reach, say 25 or 30?  You can also provide for partial distributions at various ages.
  • What powers should the trustees have?

These and more issues need to be decided for all trusts.  More complex trusts designed for tax and asset protection purposes present even more choices and get even longer and more complex. 


If you are interested creating a revocable trust, Jayde Law can help.  We enjoy helping our clients create estate plans that protect the people they love and the legacy they have created.  Give us a call today to schedule an appointment, to learn about our process, and to receive answers to any questions you may have.

Estate Planning: An Overview

15 Feb, 2023
Estate planning entails preparing your affairs for the future, including death and other life events. While older adults might give more thought to estate planning, it is an essential tool at any age. WHY IT’S IMPORTANT With estate planning, individuals and families can protect their interests during incapacity or after death. You can provide for a spouse, children, and dependent family members when you pass away. You can arrange your care and financial affairs should you suffer a severe accident or illness that renders you incapacitated. If you are a parent, you can appoint a guardian to care for and manage the inheritance of your minor children. If you own a business, you can prepare to transfer it to family members, colleagues, or other trusted individuals. You can make arrangements for your long-term care when you can no longer live on your own. You can also make funeral preparations, determine what happens to your body when you pass, and prepay for your funeral, all of which can help lessen the burden on your family members. WHAT IS AN ESTATE? Legacy planning entails passing on your estate. Your estate is everything you own, including: Savings and checking accounts Retirement accounts Investments Life insurance Annuities Houses and other real estate Cars Personal possessions, such as jewelry, furniture, and sentimental items When you die, your estate encompasses all your property upon death. If you sold or gave away property before death, it is no longer part of your estate, and you cannot transfer it upon death. Items you own with another person are also part of your estate. Depending on the type of asset, it might automatically pass to the other owner. For instance, if you own a home with your spouse as tenants by the entirety, it will pass to your spouse upon your death. WHAT IS AN ESTATE PLAN? An estate plan consists of legal documents and arrangements that determine the distribution of your assets when you die or outline your care if you become incapacitated. While a will can be a central component of an estate plan, a solid plan encompasses more than a will. It can also include legal tools that allow assets to pass outside of a will and probate (the process by which a court oversees the distribution of assets in a will). ESTATE PLANNING TOOLS In addition to your will, your estate plan could include the following: Purchasing jointly owned property or adding a joint owner to your property Designating a beneficiary on a pay-on-death bank account, retirement account, or annuity Buying life insurance to benefit your family should you pass away Creating a trust for a child Obtaining long-term care insurance to cover future nursing home or assisted living fees Executing power of attorney documents, naming health care and financial agents Making a living will, providing instructions for care should you become incapacitated Preparing a transfer on death instrument to pass ownership of your property to a beneficiary upon death WHAT IS AN ESTATE PLANNER? As professionals helping people make future arrangements, estate planners are attorneys who focus on end-of-life preparations. Estate planning attorneys assist people with drafting legal documents and understanding laws and taxes that could affect them and the loved ones they will leave behind. When creating estate plans, individuals may need to consult attorneys as well as other experts, including financial planners, accountants, life insurance advisors, bankers, and real estate brokers. WHAT DOES THE FINAL DISTRIBUTION OF ASSETS INVOLVE? The final distribution of assets is a conclusory step in the probate process before the court closes probate. When an estate goes through probate, the personal representative or executor must satisfy all debts, and the court must resolve all disputes before allowing the beneficiaries to receive the assets. At the end of the probate process, ownership of the assets of the estate is transferred to the beneficiaries. DO I NEED A LAWYER FOR ESTATE PLANNING? Although the law does not require that individuals secure legal representation to make estate plans, many find the support and guidance of estate planning attorneys invaluable. An estate planning attorney can help you identify the legal tools and strategies that suit your needs, as well as draft the necessary documents, such as wills, trusts, and powers of attorney. In addition to addressing tax concerns and drafting documents, these attorneys can help you avoid probate. Probate, the process by which the court oversees the distribution of assets in a will, can be expensive and time-consuming for surviving family members. It also opens the door for disgruntled people to challenge the validity of the testamentary document, further complicating asset distribution. An estate planning attorney could help you organize your assets to transfer outside of probate to make the transfers simpler, easier, and less vulnerable to challenges. When you are ready to create an estate plan, contact Jayde Law PLLC.

Three Things to Know About Being an Executor

01 Feb, 2023
An executor (or personal representative) is a person or entity you choose to carry out your last wishes outlined in your will. Your executor should be someone you trust is responsible enough to manage your estate after you pass away. Choosing an executor is a big decision when it comes to estate planning. So, what should you know about an executor? What should you consider before naming an executor? Here are answers to three common questions about executors. Can an Executor Decide Who Gets What? No. In most circumstances, an executor cannot decide who gets what property. Executors are responsible for carrying out the decedent’s wishes as outlined in the will. However, if the decedent did not distribute all their assets in their will, in some circumstances, the executor may be able to decide how to distribute the unassigned property. Can an Executor of a Will Be a Beneficiary? Yes. An executor can also be a beneficiary of the will. It is common for people to have their surviving spouse or children act as the executor of their estate. This choice can be cost-effective if you have a small or simple estate. Another benefit of having a family member act as the executor of your estate is they are familiar with your wishes. They know you, and they understand how you want your assets divided. If you forget to state where property goes in your will, an executor that knows you well is more likely to give those assets to the correct beneficiaries. How Long Does the Executor Have to Pay the Beneficiaries? The short answer is: It depends. The executor should work diligently to get each beneficiary paid as soon as possible. While the executor is responsible for ensuring beneficiaries receive the money or property they were left in the will, the probate process may delay beneficiaries from receiving a payout. Depending on the size of the estate and the debts and taxes the estate owes, it may take anywhere from six months to more than one year for a beneficiary to receive an inheritance. The probate process varies depending on the state, but the typical process goes like this: Submit the Will for Probate — Part of the executor’s responsibility to the estate is to file the will with the probate court. Filing the will begins the probate process. Once completed, the beneficiaries are one step closer to receiving their inheritance. The time executors have to file a will with the probate court varies by state. File an Inventory — An inventory of estate assets is required. As part of an inventory, the executor determines the total value of all estate property, money, and other assets. A completed inventory can then be used by the executor to determine whether federal or state taxes apply, or whether assets will be used to settle debts. Pay Taxes and Debts — Before the executor can distribute any assets to beneficiaries, estate debts and taxes must be paid. The executor is responsible for ensuring these payments are made. Creating a complete estate plan can be overwhelming. With the help of an experienced estate planning attorney, you can ease some of the anxieties you may be facing in thinking about estate planning. If you are ready to start the estate planning process give Jayde Law PLLC a call..
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