Handbook
• REVOCABLE LIVING TRUSTS
Your Revocable Living Trust is one of the most important and flexible methods
that can be used to avoid probate. Using this method, you put the property you
want under the control of your Revocable Living Trust. However, since you name
yourself to manage this Trust and you name yourself as the beneficiary, you are
still in control of all your property. In addition, you can make changes to the Trust
terms, add or subtract property, or even totally revoke the Trust during your
lifetime.
You will also name another individual to manage this property when you pass
away, and also other beneficiaries when you can no longer benefit from this
property yourself.
Your Revocable Living Trust avoids probate because the property that you have
put under this Trust is distributed by the individual you named in the Trust, to the
beneficiaries you named in the Trust, and while following the directions you made
in the Trust. This property does not get distributed through the Will and so the
probate process, including the expense and delay, for this property is avoided. In
addition, if you become mentally unable to handle your own affairs, the individual
you named in the Trust can immediately step in to manage this property on your
behalf.
There are some drawbacks that we should discuss. Revocable Living Trusts are
a little less familiar and harder to understand then a Will. The Attorney’s fees will
be a little higher but not that much. There is a little more paperwork and legwork
involved. For example, to put your house under your Revocable Living Trust, you
have to have the title of the house changed so that it is under the Trust.
All in all, the drawbacks can be very minor compared to the benefits.
Note: Revocable Living Trusts are designed to avoid probate and not to avoid
income taxes or creditors. In addition, they are NOT designed to avoid estate
taxes. (A common misconception. See Step 3 on how to avoid estate taxes.
There’s another type of Trust that can be used to avoid estate taxes. It is known
by various names, including Credit Shelter Trust.) When needed, the Revocable
Living Trust can be used in combination with the Credit Shelter Trust to both avoid
probate and to avoid estate taxes. In fact, the Revocable Living Trust is so flexible
that it can be used in combination with many other types of Trusts and for a
variety of purposes.
