For those looking to create an estate plan, a revocable living trust is often an attractive option. This popular estate planning tool allows you to transfer assets into a trust while retaining control over those assets during your lifetime.
But a common question arises – who legally owns property that’s placed into a revocable trust?
In this article, we’ll shed light on trust ownership and outline the benefits revocable trusts can provide.
What is a Revocable Trust?
Before diving into ownership, let’s pull back for a moment to understand what a revocable trust is. A revocable trust, sometimes called a living trust, is a legal arrangement that allows you to transfer ownership of your assets into a trust during your lifetime. You designate a trustee who will manage the assets for your benefit and the benefit of your chosen beneficiaries.
The key distinction is that you retain full control and ownership over the trust and its assets while you are living. You can revoke the trust at any time, modify terms, remove assets, and change beneficiaries. Upon your death or incapacity, the trust becomes irrevocable, and your designated successor trustee steps in to manage and distribute assets to beneficiaries.
So, in essence, a revocable living trust provides flexibility and control over your assets while avoiding probate at death. This can be contrasted with an irrevocable trust, which cannot be changed once created.
The Grantor Retains Full Ownership
When it comes to who legally owns property transferred into a revocable trust, the answer is you, the grantor! Placing assets in a revocable trust does not mean giving up ownership. You retain full legal and equitable title to the property during your lifetime.
The trustee does have legal title and some responsibilities over the trust property. However, you, as grantor, maintain control and beneficiary rights, including the ability to revoke the trust. The property remains a part of your taxable estate and could potentially still be accessed by creditors.
This is different from an irrevocable trust, where the grantor does relinquish full ownership and control. The key benefit of a revocable trust is that you can avoid probate and simplify property transfers at death while still using and controlling the property while you’re alive.
What Happens When the Grantor Dies?
Upon the grantor’s death, the revocable trust essentially becomes an irrevocable trust. The named successor trustee takes over the management and distribution of trust assets. The property no longer belongs to the grantor’s estate and does not pass through probate.
The successor trustee has a fiduciary duty to administer the trust properly and in the best interest of beneficiaries. They must follow all terms and instructions outlined in the trust document for managing and distributing assets.
At this point, the trust cannot be modified or revoked. The property transfers permanently to the ownership of the trust beneficiaries.
Why Retain Ownership with a Revocable Trust?
There are several advantages to retaining ownership over assets placed into a revocable trust versus an irrevocable trust or outright gift.
- Flexibility – You can change the trust terms, add or remove assets, modify distribution instructions, and revoke the trust up until death or incapacity. This allows you to respond to changing life circumstances.
- Avoid Probate – Assets in the trust pass directly to beneficiaries and avoid the court-supervised probate process. This can save time and expenses.
- Consolidation – Placing assets into one revocable trust allows for consolidated, simplified management compared to owning property individually.
The flexibility and control provided by retaining ownership of assets in a revocable trust make it an attractive estate planning option for many. With the help of an experienced estate planning attorney, you can craft a customized revocable trust that meets your specific needs and goals.
Creating a Revocable Living Trust
If you’re interested in including a revocable living trust as part of your estate plan, the attorneys at The Law Office of Brenton C. McWilliams can help guide you. Reach out to us today to discuss your specific situation, goals, and how a trust could benefit you and your family.
Some common questions we receive:
- Who should be designated as a trustee?
- What assets should be transferred into the trust?
- When is the best time to create and fund a trust?
- What are the exact steps for setting up a revocable trust?
With experience in estate planning and trust law, we are here to provide tailored guidance at every step. Contact us to get started planning for the future.