How Does a Revocable Trust Work?

Video

Hi, it’s Andy Stautz with Stautz Law. Today we’re talking about revocable living trusts. This is a huge planning tool for the most typical clients.  

But there are lots of questions. What is a revocable living trust? How does it work? Do I need one? And it’s worth explaining the basics here. So you kind of know what you’re getting into.  

A revocable trust is just a trust that can be revoked: revoke-able trust. Umm, it’s a living trust because you make it while you’re alive and you can change it while you’re alive. And a trust is a set of instructions for how someone else [or yourself!], a trustee, should manage the property in trust.  

With a revocable living trust you make it yourself. And you make yourself the trustee and you make yourself the lifetime beneficiary. So you’ve created this legal structure that kind of redefines your role relative to your property.  

But nothing else changes. It’s a legal fiction in that regard.  

So if you create a revocable trust, you take your property and you change the title, you change who owns it in the eyes of the law from “you, yourself” to “the trust and you as trustee of your own trust.” And that doesn’t make any difference while you’re alive. If you, assuming you, name yourself as the life beneficiary, you know, you still get to control what you do with the property. Everything’s the same.  

Except when you die, because the property is in trust rather than owned in your own name, it goes outside of probate. It goes according to the instructions in the trust instrument. 

So as a planning device, it’s great, right? Your setting the trust up in advance lets you use the property just the same as if you had never done it. Until time of death, when all of a sudden you get the benefits of, you know, naming other beneficiaries, naming a successor trustee, right? Umm. And that can be as simple or as complicated as you want.  

It can be as simple as OK. My trust is mine while I’m alive. When I die, it distributes all the assets to beneficiaries A, B, and C. My children. In which case it’s basically a will. Except no probate. It costs some money to set up, but it saves you expenses on the back end and makes life easier for your beneficiaries.  

Or it can be more complicated. You can set up a revocable trust that will have a continued life. That will stick around. Maybe you’ve got minor children or minor grandchildren. And you don’t want the distribution of trust assets to happen all at once. You can stage it. You can add life milestones. You know: when they graduate college, when they turn 30. Whatever else. Powerful planning tool.  

It depends on this planning ahead though. You have to set up the trust during your lifetime. You have to move the assets into the trust so that the legal fiction works. But it doesn’t change anything about your lifetime use of the property.  

So those are the basics. Obviously, whether it’s right for you or what exactly your revocable trust should contain are personal questions: that’s legal advice that you need to come in for a planning meeting for. And that’s exactly what we’ll do: Talk about your situation. See what you need and come up with the best plan for your family, your property.  

You can book that planning meeting online. You can give me a call. I look forward to working with you soon. Thanks for watching!