How to set up a Living Revocable Trust?
Make it easy for your heirs to inherit your assets.
Living Trust Vs Wills
What is a Living Revocable Trust?
Who should have a living trust?
If I have a living trust, do I still need a will?
Make it easy for your heirs to inherit your assets.
A living trust (sometimes called an "inter vivos" trust) is a written legal document through which your assets are placed into a trust for your benefit during your lifetime and then transferred to your designated beneficiaries at your death by your chosen representative, called a "successor trustee."
"Living Trusts," are an effective estate-planning tool for avoiding the costs and hassles of probate, preserving privacy and preparing your estate for ease of transition after you die.
Unlike in a
will, assets in a living trust will generally pass to heirs sooner.
Contrary to what you've probably heard, a will may not be the best plan for you and your family. That's primarily because a will might not avoid probate when you die. A will in some jurisdictions like Mumbai, Chennai, Kolkata etc. be validated by the probate court before it can be enforced.
Also, because a will can only go into effect after you die, it provides no protection if you become physically or mentally incapacitated. So, the court could decide who will take control of your assets before you die.
Fortunately, there is a simple and proven alternative to a will -- the revocable living trust. It avoids probate, and lets you keep control of your assets while you are living -- even if you become incapacitated -- and after you die.
What is probate?
Probate is the legal process through which the court sees that, when you die, your debts are paid and your assets are distributed according to your will. If you don't have a valid will, your assets are distributed according to succession laws applicable to you.
What's so bad about probate?
It can be expensive. Legal fees, executor fees and other costs must be paid before your assets can be fully distributed to your heirs. If you own property in other countries or states, your family could face multiple probates, each one according to the laws in that state. These costs can vary widely; it would be a clever idea to find out what they are now.
It takes time, usually twelve months to two years, but often longer. During part of this time, assets are usually frozen so an accurate inventory can be taken. Nothing can be distributed or sold without court and/or executor approval.
Your family has no privacy. Probate is a public process, so any "interested party" can see what you owned, whom you owed, who will receive your assets and when they will receive them. The process "invites" disgruntled heirs to contest your will and can expose your family to unscrupulous solicitors.
Your family has no control. The probate process determines how much it will cost, how long it will take, and what information is made public.
How does a living trust avoid probate and prevent court control of assets at incapacity?
When you set up a living trust, you transfer assets from your name to the name of your trust, which you control -- such as from "Mr Jagdish Singh and Jaya Singh, husband and wife" to "Jagdish and Jaya Singh, trustees for Jagdish and Jaya Singh trust dated (month/day/year)."
Legally you no longer own anything; everything now belongs to your trust. So, there is nothing for the courts to control when you die or become incapacitated. The concept is simple, but this is what keeps you and your family out of the courts.
Do you lose control of the assets in the trust?
Absolutely not! You keep full control. As trustee of your trust, you can do anything you could do before -- buy and sell assets, change or even cancel your trust. That's why it's called a revocable living trust. Nothing changes but the names on the titles.
If something happens to me, who has control?
If you and your spouse are co-trustees, either can act and have instant control if one becomes incapacitated or dies. If something happens to both of you, or if you are the only trustee, the successor trustee you personally selected will step in. If a corporate trustee is already your trustee or co-trustee, they will continue to manage your trust for you.
What does a successor trustee do?
If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you resume control. When you die, your successor trustee pays your debts, files your tax returns and distributes your assets. All can be done quickly and privately, according to instructions in your trust, without court interference.
Who can be successor trustees?
Successor trustees can be individuals (adult children, other relatives, or trusted friends) and/or a corporate trustee. If you choose an individual, you should also name some additional successors in case your first choice is unable to act.
Should I consider a corporate trustee?
You may decide to be the trustee of your trust. However, people select a corporate trustee (professional company) to act as trustee or co-trustee now, especially if they don't have the time, ability or desire to manage their trusts, or if one or both spouses are ill. Corporate trustees are experienced investment managers, they are objective and reliable. NexGen Estate Planning Solutions can act as a Corporate Trustee for your trust.
Doesn't a trust in a will (testamentary trust) do the same thing?
Not quite. A will can contain wording to create a testamentary trust, care for minors, etc. But, because it's part of your will, this trust cannot go into effect until after you die and the will is probated. So, it does not avoid probate and provides no protection at incapacity.
If I have a living trust, do I still need a will?
Yes, you need a "pour-over" will that acts as a safety net if you forget to transfer an asset to your trust. When you die, the will "catches" the forgotten asset and sends it into your trust. The asset may have to go through probate first, but it can then be distributed as part of your overall living trust plan. Also, if you have minor children, a guardian will need to be named in the will or through a “Letter of Guardianship”.
Who should have a living trust?
Age, marital status and wealth don't really matter. If you own titled assets and want your loved ones (spouse, children or parents) to avoid court interference at your death or incapacity, you should probably have a living trust. You may also want to encourage other family members to have one so you won't have to deal with the courts at their incapacity or death.
How to go about it?
Talk to a NexGen Estate Planner to set up a Living Trust to seamlessly transfer the assets you may leave behind for your children.
NexGen Estate Planning Solution has been helping Indians establish and manage trusts for many years. We have expertise in trust administration and can act as your trustee.
and we'll contact you for our "
Living Trust
".