Webster’s Dictionary defines “trust” as “a belief that someone or something is reliable, good, honest and effective”. As people, we place our trust in many different places: in God, in our family and in our friends. In this election year, many of us are struggling to discern which of the presidential candidates deserves our “trust” and therefore our vote.
In the Estate Planning context, a “trust” is “an arrangement in which someone’s property or money is legally held or managed by someone else or by an organization for usually a set period of time”. The most common type of trust utilized today is called the Revocable Living Trust. The primary reason many execute a Revocable Living Trust (RLT) is to avoid probate.
When an individual passes away after having executed a will, the law deems him to have died testate. If a person dies without a will, she passes intestate. In either case, a designated individual must qualify as executor (testate) or administrator (intestate) and proceed with the probate process. During this
process, the executor/administrator submits required information pertaining to the estate to a court-appointed commissioner who oversees the process. Assets are collected, liabilities are paid and ultimately the proceeds of the estate are distributed to the appropriate beneficiaries. This process can last a year or more and be very costly.
In the RLT, the Settlor (maker) of the trust executes the trust document which delineates his, her, or their wishes for the disposition of the estate after death. Certain assets (house, brokerage accounts, bank accounts, etc.) are then simply re-titled in the name in the trust. The Settlor is also named as the Trustee in the RLT to insure that he or she does not lose control over the assets. Thereafter, these assets are available to the Settlor/Trustee to be utilized as he or she sees fit. After death, a Successor Trustee named in the RLT takes control over the trust assets, pays any debts of the decedent and proceeds to distribute the proceeds to the named beneficiaries. Since the assets were placed in the trust prior to death, there is no need for engagement in the lengthy and costly probate process.
With the Revocable Living Trust, one’s “trust” that his or her last wishes will be efficiently and effectively carried out can be realized.