Law and order is what governs the smooth running and regulation of the world. A trust is basically a relationship whereby particular piece of property is held by a party for the benefit of the other. A living revocable trust is essentially a legal document which is responsible for holding ownership to one’s property and assets. It ensures that one’s ownership to certain assets is transferred to the trust, without relinquishing any control of the true owner.
A Living revocable trust is one such legal document which enables a person to control all assets but indirectly. This is because according to the documentation the ownership is transferred to a secondary owner but the control rests in the hand of the primary person. It is simply a transfer of title ownership on paper.
The legal document is created by a person known as the Trustmaker (in legal terms). The trustmaker entrusts his assets to a Trustee who invests and spends it in accordance with and for the benefit of the trustmaker who also becomes the beneficiary. The true owner still has the power to buy, sell, borrow or transfer any of the assets.
It is often seen that a living revocable trust is confused for a will. This is because similar to a will; a living revocable trust also includes details and instructions for how the assets should be managed upon the death of the true owner. However, there are some basic differences which make them different.
A Living revocable trust:
- Does not give the court any authority to control your assets in case of incapacity
- Gives you the leisure of leaving your assets to your minor children/grandchildren.
- Does not have to go through probate (Process by which a will is proved valid by court)
As long as the trustmaker is alive and well, the agreement will have definite provisions which will allow the trustmaker to manage and invest the assets for his/her own benefits. The only minor change would be that, he/she would be signing the legal documents as a trustee rather than a definite owner. However, since the living revocable trust is a legal document it is bound to have provisions for any calamity on the trustee’s part as well. There are two clauses which provide instructions if:
- The trustmaker becomes mentally incapacitated; and
- The trustmaker dies.
If the trustmaker is incapable mentally to serve as a trustee, then the living revocable trust agreement will name a particular “Disability Trustee” who will take over the investment and management of the assets from the indisposed trustee. The Disability Trustee will basically step into the main trustee’s shoes and pay all the bills as well as look after the funds.
When the trustmaker has passed away, an ‘Administrative’ or ‘Successor’ trustee takes charge and makes sure all the final bills, debts and taxes are paid off. After the tables are cleared, he/she will then distribute the remaining assets in accordance with the instructions provided in the trust agreement by the original trustee.
A living revocable trust, as we have read above is an essential and more importantly, a hassle free way of law management for families who wish to pass things on to future generations.