Revocable Living Trust - How it Works for Beneficiaries
Living trusts are a common tool used to help individuals accomplish estate planning goals. A revocable living trust allows you to transfer assets to a trust that will manage them and distribute the assets to your heirs according to your instructions. Because a living trust is revocable, it offers you the flexibility to modify the trust or even cancel the trust as circumstances in your life change. That makes it a useful tool for many situations.
Below is some general information to give you a better understanding of revocable living trusts. If you need to create or update an estate plan and have specific questions about whether a living trust should be part of your plan, let the attorneys at Brady Cobin Law Group review your situation and discuss whether a revocable trust would be of benefit to you.
For more than three decades, our highly qualified Raleigh trust and estate attorneys at Brady Cobin Law Group, PLLC have helped individuals and families in North Carolina plan for the orderly transfer of family assets to the next generation. Our attorneys at Brady Cobin Law Group, PLLC offer trusted guidance based on many years of experience working with living trusts. Our goal is to honor the hard work, wishes and charitable goals of our clients.
How Does a Revocable Living Trust Work?
A revocable living trust is established in a legal contract prepared by an attorney. The creator of the trust, known as the grantor, transfers assets such as bank accounts, brokerage accounts, stock, real estate or valuables into the living trust. This process is known as funding the trust Depending on the terms of the trust, the trust can produce different results.
A trustee is designated to be in charge of the assets and to carry out the instructions contained in the trust documents for distribution of the assets. As the creator of the trust, you typically name yourself as the trustee or co-trustee initially and retain control of the assets in the trust. You also designate a successor trustee to take over in the event that you become incapacitated or die.
Once the successor trustee takes charge, the trustee manages the assets in the trust on behalf of the grantor if he or she has become incapacitated, or for the beneficiaries of the trust, if the grantor is deceased. The trust documents specify how, when and to whom the assets in the trust will be distributed.
An important feature of a revocable living trust is that the creator of the trust retains the legal right to make changes to the trust or terminate the trust up until his or her death. With a revocable living trust, the grantor can change the assets, modify the beneficiaries or cancel the trust. The grantor still has control of the assets in the trust.
By contrast, an irrevocable trust cannot be modified or terminated without the permission of the beneficiaries.
Is a Revocable Living Trust Right for Me?
A living trust, or revocable trust agreement, is the most commonly used type of trust. A revocable trust agreement can accomplish many of the same goals as a will, yet help you pass assets to your heirs without going through the probate process.
A trust agreement can be the primary document directing the distribution of your assets upon your death. But whether it’s right for you depends on your individual circumstances.
A revocable living trust is not appropriate in every situation. For tax planning purposes, many estate plans include irrevocable trusts, which cannot be amended or canceled once they are established.
If a revocable living trust is used as part of an estate plan, it typically becomes an irrevocable trust upon the death of the creator of the trust.
The Benefits of a North Carolina Revocable Living Trust
A living trust has three distinctive characteristics:
- A living trust is revocable and amendable during your lifetime. You can make changes to a revocable trust or dissolve it without having to go to court. In that way, you maintain control over your assets even after they are placed in trust.
- Secondly, you can move your assets in and out of the trust. You retain complete control of your assets.
- Because you have the power to revoke the living trust and to move your property in and out of the trust, you are not taxed any differently. You would still file your tax returns as you always have. You still keep the same bank account numbers. The only difference is when you receive a bank or brokerage statement of assets placed in the revocable trust, it will refer to you as the trustee.
Depending on your particular financial circumstances, you may realize some tax advantages by using a revocable living trust as part of an estate plan.
A benefit of a revocable living trust is that you are protected in the event you become incapacitated. The successor trustee, who you have chosen, will step into your shoes and manage the assets you’ve placed in the trust on your behalf until your death and then distribute them to your heirs, as you stipulated.
Because the assets are inside the trust, the trust directs how the assets are distributed, based on your wishes. You do not have to rely on a will to transfer your assets. It helps avoid the court process to change the title of your assets after your death to your heirs. That certainly is a big advantage and can allow your heirs to receive the assets more quickly.
The contents of the trust remain private. A trust does not go through the North Carolina probate process and becomes a matter of public record.
Common Misconceptions About an NC Revocable Living Trust
There is a misconception that anyone can purchase a living trust kit and create your own living trust. That is a risky approach and is not advised because of the complexity of estate law.
A revocable living trust is a tool used in estate planning. You should work with a qualified estate planning attorney to create a trust agreement that serves your needs and addresses your future goals.
There is a misconception that you lose control over assets placed in a trust. With a revocable living trust, the creator of the trust retains control of the assets and can move assets in or out of the trust as desired.
While beneficial in certain situations, a living trust is not the ideal approach for everyone to create an estate plan. An irrevocable trust may be preferable to a living trust if your primary goal is to lower the number of your assets subject to estate taxes.
A qualified estate planning attorney can review the situation and determine whether it’s the best approach to accomplish your goals.
Talk with a North Carolina Attorney About a Revocable Living Trust
The qualified trust and estate planning lawyers at Brady Cobin Law Group in Raleigh, N.C., can help you identify the tools to accomplish your estate planning goals. Attorneys Dan Brady and Andrew J. Cobin are both Board Certified Specialists in estate planning and probate law by the North Carolina State Bar. Our attorneys can assist you in determining whether the creation of a revocable living trust offers advantages to you.
Please don’t hesitate to contact us for a consultation about a revocable living trust. Call 919-782-3500 to speak to a revocable living trusts lawyer. Fees for estate administration assistance are legally reimbursable from the estate’s assets.