What is a revocable living trust?
It’s an important part of even some of the most basic estate plans. So that being said, it’s an important estate planning concept to know. So what is it?
Don’t be scared by the fact that it sounds complex. It’s actually a simple concept and one of the most fundamental pieces of an estate plan.
A trust is a legally separate entity. But a revocable trust is revocable, so in a way, it's not really a separate taxable entity. It's one and the same with the grantor -- the one who sets up the trust.
The best analogy for a revocable living trust is the basket analogy. Think of it as a basket you create to hold your assets. Upon your death, you've designated who will take over the basket and distribute what's inside. During your life, you're the basket holder. You can put things in the basket and take them out as you please.
A revocable trust can be drafted in such a way as to create many sub-trusts inside. Many of these sub-trusts can be irrevocable.
But going back to the simplest of revocable living trusts, they're really just documents. They are documents that lay out how you want your assets distributed. While a will does the same thing, a revocable trust has one difference -- it doesn't need to go to probate court (or in New York, Surrogate's Court).
Here are a few things to keep in mind when planning your revocable living trust:
One: Choose your successor trustees wisely. For starters, you need to make sure that the next basket-holder, or your "successor trustee," is responsible enough to manage the trust when you are no longer able to.
Two: Fund the trust. The next item you need to consider is the funding of the trust. This means that you will actually place the items inside the "basket." This could mean that you will have to transfer title of property to the trust.
A trust is simple and any good estate planning lawyer can help you put together a solid revocable trust.