Revocable Living Trust Forms

Revocable Living Trust Forms

A Revocable Living Trust is a legal estate planning tool created by an individual (s) (the Grantor) to hold their assets and property, and that designates who will receive the said assets and property upon the Grantor’s death or incapacitation.

The term “revocable” means that a Living Trust can be amended or revoked at any given time by the Grantor, and assets and property can be added or removed from the living Trust as may be deemed necessary. With that in mind, the creator of a Living Trust usually maintains ownership over their assets. They can modify the document or decide to revoke it at any point in their lifetime. The Grantor can appoint themselves manager of the Trust (Trustee). However, given the case, they still have to appoint a Successor Trustee who will execute the document upon the Grantor’s incapacitation or death.

Generally, a revocable living trust becomes automatically irrevocable upon the Grantor’s death. The Successor Trustee gains the power to distribute the assets within the Living Trust to the beneficiaries as per the Grantor’s wishes.

A revocable Living Trust is alternatively known as:

  • A Living Trust
  • Inter-Vivos Trust
  • A Grantor Trust

Revocable vs. Irrevocable Living Trust

One key difference between a revocable living trust and an irrevocable living trust is the degree of control and ownership that the Grantor has over the Trust once it is drafted. This difference is as explained in the section below:

Whereas a Revocable Trust can be amended or terminated by the Grantor at any given point in their lifetime, an irrevocable living trust cannot be modified or revoked by the successor trustee without the permission of the beneficiaries once created.

The Grantor of an Inter-Vivos Trust can choose to name themselves Trustees, and the assets in the Trust are considered the Grantor’s property, meaning that they must be filed with the Grantor’s income taxes. Upon the Grantor’s death, the Trust will instruct how the property and assets will be distributed to the beneficiaries.  On the other hand, all assets in an irrevocable living trust are owned by the Trust and not the Grantor. This separation helps to protect the contents of the Trust from estate taxes and undesirable lawsuits or claimants.

Despite these two significant differences, a revocable living trust and an irrevocable living trust are similar in the manner that both trusts bypass the probate process. However, a revocable Trust does not protect from estate taxes.

Revocable Living Will vs. Last Will

Both the Revocable Living Will and the Last Will are similar in the manner that both documents allow the writer of the Will to control what happens to their property and assets upon their death. Nonetheless, there are some significant distinguishing features between a Revocable Living Trust and a Last Will. This is as shown in the table that follows:

No.Revocable Living WillLast Will
1.A successor Trustee usually executes a Revocable Living Will once the Grantor dies. The successor trustee is only responsible for managing the specific property left through the revocable living trust  One can use their Will to name an executor who will wrap up the estate once the testator dies. The executor will also be liable for paying the testator’s bills, communicating with the court, and ultimately distributing any property that goes through probate
2.Assets and properties left through a living trust does not go through probateProperty left through a Last Will usually goes through probate
3.After the death of a grantor, a living trust doesn’t become a public document. Therefore the affairs of the Grantor remain privateUpon the testator’s death, a Last Will becomes a public document; thus, it does not keep the affairs of the individual private.
4.To leave property through a living trust, a grantor must transfer the given property into the Trust. Assets with title documents including real estate property must be retitled such that the owner of the property is the TrustNo transfer of property is required when an individual is using a Last Will for estate planning purposes
5.A Grantor Trust allows the Grantor to give their spouse, child, or any other trusted party  authority over trust property if they become incapacitated and unable to manage their affairsOne cannot do this with a Last Will. However, the individual can make a durable power of attorney to appoint someone to manage their finances if they are incapacitated.
6.A living trust does not allow the Grantor to leave instructions about how they want their debts and taxes to be paid.With a will, one can leave instructions about how taxes and debts will be paid. An individual can also use the document to forgive debts owed to them.
7.Because living trusts must cover the Trustee’s duties, they tend to be more complex to make. Instead of witnesses, the document must be signed before a notary publicTo execute, a Last will only need to be signed by the creator and at least two witnesses who will receive anything under the Will.

Understanding Revocable Living Trust

To have an in-depth understanding of the Revocable Living Trust, it is best that we first explain why one needs a Revocable Living Trust, the consequences of not having the document, its uses, as well as the major components of the revocable Living Will. Here is the detailed information:

Need for a revocable living trust

Ideally, every individual who owns any property can benefit from this legal document because death or incapacitation is unforeseeable. A revocable living trust protects an individual’s assets from probate. It allows one to decide how their property should be handled or distributed if they can no longer manage it for themselves.

Even if an individual is currently young and healthy and feels like they don’t need to create a Living Trust, it is optimal to draft one. If an individual suddenly becomes incapacitated mentally or physically, it would be too late to enlist any legal protections for their assets and property. Thus, one must create a living trust to secure the future of their heirs and prevent any undesirable lawsuits and claimants in the future. In any case, a revocable living trust can be amended or revoked at any point in life if situations change.

Common Uses of a Revocable Living Trust

Typically, a revocable living trust covers the following three phases of an individual’s life:

During the Grantor’s Lifetime

Essentially, a grantor Trust should be created while the Grantor is still in good health and of sound mind. Like a Last Will or any other end-of-life arrangements that a person makes, a living trust should also be part of this necessary documentation.  In essence, life is unpredictable, and no single person knows for sure when their life circumstances will change. Therefore, an individual should create a Living Trust as soon as they can and regularly pay attention to their Trust.

 Any newly acquired assets should be added to the Trust as one purchases them. If a person dies, any property outside of their Trust is subject to probate. When an individual puts all their assets and properties on a Living trust, they will control the Trust or decide to appoint a successor trustee to control the assets on their behalf during their lifetime.

When the Grantor falls ill

In the event of a grantor’s illness, when the individual cannot manage assets independently, there is a provision in the living trust agreement that allows the Grantor to name a trustee who will manage the property on their behalf. The Trustee will also be responsible for the Grantor’s bills, including medical expenses and any of the responsibilities associated with managing the assets covered by the Trust.

It is essential to note that a successor trustee only has a legal obligation to manage the given assets, but they do not have the legal power to revoke or amend a Trust once created.

Upon the Grantor’s death

 After the Grantor’s death, the revocable living trust automatically becomes an irrevocable trust, and the named Trustee takes over the distribution of the assets in honor of the Grantor’s wishes. Besides, the Trustee will be in charge of paying the Grantor’s final bills and settling the estate. He/she also must disburse the remaining assets to beneficiaries, as detailed in the Living Trust.

Involved parties in a living trust

A typical Living Trust consists of the following parties:

  • The Grantor/Trustor- This is the original creator of the Trust. He/she also funds the Trust hence called the trustor.
  • Trustee- A trustee is an individual named by the Grantor to manage the Trust’s assets. Every so often, grantors name themselves the Trustee of the Trust. Nevertheless, if this isn’t the case, then the named Trustee will control the trust assets even while the Grantor is still alive.
  • Successor Trustee- A successor trustee is an individual who is responsible for administering the grantor’s trust in the event that he/she either passes away or becomes incapacitated-ie the grantor is unable to administer the trust on their own.
  • Co-trustees/ co-grantors– Married spouses who set up one Trust together are co-grantors/co-trustees of their Trust.  Most married couples choose to co-own the Trust, such that when one dies or becomes incapacitated, the living spouse assumes full responsibility of the Trust, with no other actions required, including court interference.

Consequences of Not Having a Living Trust

Depending on an individual’s age, wealth status, and relationship status (i.e., married or not), an individual may need or not need a Living Trust. However, if one does not create the document, there are consequences. These include:

One major disadvantage of not creating a living trust in good time is that an individual’s estate- that is, all their possession will have to go through probate in the event that the individual suddenly passes away or becomes incapacitated. But what is probate, and how does it work? Probate is a legal procedure through which a court governs who receives an individual’s possessions. This is usually very costly, time-consuming and the individual’s heirs will most likely have difficulty transitioning after his/her death. However, if an individual hurriedly Drafts a Will, which is declared valid, before their death or are declared incapacitated, but, with no Living Trust, then their wishes will be honored in the long run, but their estate will still have to pass through the tedious and expensive probate process which is usually conducted publicly.

If an individual does not draft a Living Trust while they still can, the worst-case scenario, which happens very often due to the probate process, is a dispute over possessions from beneficiaries. State probate laws sometimes alter the manner in which an individual’s possessions are to be distributed, which may cause disputes as certain beneficiaries may be expecting specific assets as promised by the individual and end up receiving different items. Therefore, failing to create a revocable living trust in good time may lead to bitter family fights, which ruins friendships and family relationships.

Elements of Revocable Living Trust

A revocable living trust should all the specific arrangements for a grantor’s assets during his/her health, illness, and in the event of their death. But what assets should one include in their Living Trust?

We have explained a number of the most common types of assets that are included in a Trust. They include:

Cash or bank accounts

All assets in both cash savings or bank accounts should be included in a Living Trust such that the Trustee can manage them if the Grantor is no longer able to manage them on their own or if they die.

Personal property

Tangible personal property usually includes tangible personal property. This includes clothing, books, personal paper, Jewelry, personal computers, and household items. Household items include furniture and furnishings, collectibles, artwork, or antiques. Personal property is also inclusive of an individual’s motor vehicles, airplanes, boats, firearms, tools, cattle, pets, etc. all the above-mentioned personal properties should be included in a Living Trust. However, these items need to be retitled such that they are owned by the Trust and not in the individual’s name to avoid probate.

Business interests

If the Grantor runs a sole proprietorship business or has a personal interest in any given company, these should be included in the Grantor Trust. Where it is an interest in a business, the interest is subject to the provisions of any partnership or shareholder’s agreements. In essence, most business agreements lay out how these shares must be sold or managed upon the holder’s death. If the business agreement stipulates that the shares must be sold to a remaining business partner, the assets from that sale can then be included in the Trust.

Certificates of Deposit

Investment accounts such as certificates of deposit must first be retitled before being transferred to the Trust. However, CD accounts usually have designated terms with penalties for early withdrawal. Therefore, if a grantor has their assets tied up in CDS, it would be best if they wait to retitle them until they roll over or simply visit the bank with relevant documentation, including CD account number, ID card, and the Trust document. Then ask a bank representative to either open a new CD account under the Trust or provide the grantor expert advice on their available options.

Real estate property

Any other property that the Grantor owns, including their home and rental property, should also be included in a Living Trust.

Brokerage accounts and stocks

Stock holdings and retirement accounts can also be included in the Living Trust. For one to transfer brokerage accounts and stocks and fund them in a Living Trust, he/she must obtain a medallion signature guarantee on the stock transfer form and mail the original certificates to the stock transfer agent in exchange for a new certificate that is titled in the Revocable Living Trust’s name.

Other things to include in a Living Trust

Generally, any valuable property with a high monetary value should be placed into a trust to protect it until the property is ready to be transferred to the intended heirs. To be valid, a Living Trust should stipulate the following details:

  • It should outline the specific property that is being transferred into the Living Trust
  • The Trustee’s name and any backup trustees must be included in the document
  • It must outline the powers and duties of the Trustee
  • The document should indicate the beneficiaries to the Grantor’s assets upon his/her death
  • Any specific gifts of property to specific people
  • A children’s sub-trust or pet trust
  • The Grantor can also include their life insurance policy in the Trust. However, this depends on the Grantor’s relevant state laws concerning trust protection from potential lawsuits and debts.

Free Forms (by State)

Conclusion

A revocable living trust is an essential legal document that allows individuals to place their assets in a Trust while still alive for their beneficiaries to inherit after their death. The document allows one to outline their Living Trust’s details and helps avoid the lengthy and costly probate process. A Living Trust is also very flexible; hence, the Grantor can amend or revoke it anytime during their lifetime.

In many states, the revocable living trust is a standard method for protecting one’s property and assets from life circumstances. Therefore, creating one as early as possible would be entirely worthwhile.

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