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The Layman's Complete Guide to a Revocable Living Trust in Arkansas - YouTube
Channel: DeWitt Law Firm - NWA Estate Planning
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If you have questions about what we are talking about today, estate planning questions,
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probate questions, questions in general, or just want to talk
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go to http://www.PlanWithGary.com. You can setup a time to talk in person
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or on the phone. http://www.PlanWithGary.com
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Later in this video we will go over a more detailed definition of a trust.
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For now, just remember it is a way to protect assets and pass
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assets to others without the need for judges and courts.
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That is, no probate. A revocable living trust is just
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one part of your complete estate plan. Revocable means you can change
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or revoke the trust. Living means you establish the trust during
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your lifetime.
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If you understand the advantages of a revocable living trust first, then
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you don't need to understand the inner workings. Its like a clock...
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you can either understand how to tell time or understand how the clock
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works. Only a watchmaker needs to know both. Like the watchmaker
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attorneys need to know how trusts work and what the result is.
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You should understand what a trust can do for you more than you should know all the inner
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workings inside and out. The advantages of having a trust
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are many and are presented here in no particular order.
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All the assets in a trust are NOT subject to probate.
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Probate is the process of admitting the Will to court and following the instructions
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in the Will to move your property to other people. Probate is public
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your private life will be included in the court record, including an inventory
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and accounting. This means that everybody can find out how much
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you are worth. A Trust makes assets available to other people, your
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loved ones, quickly and easily without the need to go to court and see a judge.
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Probate can take years and tie up the money and other property
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until complete. Probate can be a very expensive and emotionally draining
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process. If you look at the table, you'll notice that probate runs
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6% or more of the value of the estate. With a trust
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you completely avoid probate and save that 6% for your loved ones.
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Not to mention, they get access to the money and other assets quickly
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without court intervention.
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Trusts can protect children with special needs or people receiving government benefits.
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A trust can be setup to supplement public benefits
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while not destroying their eligibility for those benefits.
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Trusts protect children with substance abuse problems.
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You can setup a revocable living trust to pay for their living expenses
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directly making sure they have a safe place to live, but not give them
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enough money to make their habit worse. The same goes for children with chronic debt
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problems or chronic gambling problems.
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Trusts protect your assets and property now and later.
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The trust protects your goods now by providing for a second or third trustee to
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manage the trust property if you can't for any reason. Later, a new
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trustee takes over and follows the instructions in the trust, typically
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distributing the property in the trust to other people.
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Trusts make sure your children don't squander the money.
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Trusts can provide for higher education among other things while preserving
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assets. You can setup a trust to pay landlords, schools, and
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bills directly while providing an entertainment and food allowance to your children.
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Trusts leave you in control now and later. You can continue to manage
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your money and other assets long after you are gone.
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You can attach "strings" and conditions to spending the money.
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Trusts protect your assets in case of incapacity.
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A revocable living trust is a very efficient way to protect your assets.
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If you become incapacitated, then your successor trustee
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whom you've already chosen, steps in and takes over management of the property
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in the trust. You have hand picked the person you trust to
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take over management of your property and can rest easy.
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Trusts protect your financial rights.
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Trusts leave instructions on how to manage and distribute your assets.
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That is how to invest and spend your hard earned money now and later.
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For example, you can request the money in a trust be invested with a certain advisor
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and the way you want it invested, conservative or aggressive.
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You can delay the passing out of assets until people are of a certain age or
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or other conditions are met. You might say you keep "strings" on the money.
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Trusts protect jointly owned assets. If something were to happen to you
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and your spouse at the same time, a revocable living trust will work
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to protect the assets and provide for your needs during your period of incapacity.
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Trusts can avoid 2 probates. If you and your spouse pass together, or
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closely together, then even jointly owned assets would be subject to probate
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without a trust in place. You should go ahead and establish your trust now
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rather than after the passing of the first spouse. If the second spouse
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no longer has the mental capacity to sign a contract, then they can't create a tru st.
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It protects out of state real estate from probate. If you own property in more
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than one state then you should really consider a trust. If not,
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probate must be done in more than one state adding to the cost and time.
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You can create a trust in your home state, then have the out of state property deeded
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to your home state trust. Once you do this, the trust rules take over.
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What is common to all trusts, is that they require an agreement and something to hold
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in trust for a third person. In a trust, one person gives
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property to another person, the trustee. The other person then is trusted
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to manage that property for the benefit of the third person or people,
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the beneficiary. A trust terminates under certain conditions.
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A trust is a contract between two people for the benefit of a third person.
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The two people are called the grantor (or trustor or settlor) and the
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trustee. The third person is usually called the beneficiary.
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The grantor is the person creating the trust. They are one party that must
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sign the contract. The grantor is a required person for
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creating a trust. The trustee is the person that the grantor gives the
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grantor's property to. The trustee is trusted to manage
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the property for the benefit of the beneficiary.
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The beneficiary is the person who benefits from the property in the trust.
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A trust is a bucket you put assets into. Somebody gets to hold
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the handle and control the bucket. That person is the trustee.
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The person who puts stuff into the bucket is the trustor (the trust maker
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or the trustor). The person who gets to play with and eventually own
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the stuff in the bucket is the beneficiary. The beneficiary
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the person that will benefit from the stuff in the trust along with the
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stuff you put a set of instructions that anybody who holds the handle must
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follow.
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The word revocable means, in law, you can revoke something. In the case of a
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trust it means you can turn off the trust. If you have the legal capacity to sign a
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contract. Furthermore, you will probably reserve the right to change
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the trust or make amendments.
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A living trust is a trust you create during your lifetime.
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So a revocable living trust is a trust created during your lifetime
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and is revocable during your lifetime.
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And typically during your life you play all three roles of trustee, grantor, and beneficiary.
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It is only after you and your spouse's passing that a new
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trustee comes in and the final beneficiaries become active.
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While a trust is a powerful tool, there are some things that a trust just cannot
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do for you. You can't shield assets from Medicaid.
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A revocable living trust is considered an assets for purposes of Medicaid.
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However, you can revoke the trust and deal with the money other ways.
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You can't protect assets from creditors. Since the assets in your trust are considered
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yours, creditors can still reach your assets at least while
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living. You have reserved the power to transfer the assets back to yourself
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so the assets are available to you to pay the creditors.
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A trust can't preserve your medical decisions. You need other documents
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to protect and preserve your medical decisions. A trust has nothing to do
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do with telling doctors and loved ones your wishes for ventilation, hydration, and
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any other medical decisions. You need to create a medical power of attorney
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a HIPAA waiver, and a living will. Each of these
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plays a role in your medical decisions and forms a cohesive whole.
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Preserve all your financial and legal decisions. You have some decisions
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that fall outside a trust. Durable powers of attorney are what
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you need to have somebody you trust to make legal and financial decisions for
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assets and things outside the trust. For example, if you're in
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a car accident and sued, your trustee cannot answers the lawsuit.
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Finally, a trust cannot take away everything from your spouse.
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Your spouse may still be able to claim their elective share. In RE
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estate of Thompson, 2014, Arkansas
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an elective share is the minimum under law you can leave your spouse.
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In Arkansas this is typically 1/3rd of non real estate
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outright and a 1/3rd life estate in real estate. A life estate
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means that your spouse has control of the property during their lifetime
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and at their passing, ownership automatically passes on to the next
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person in line.
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Setting up a revocable living trust is not difficult with the proper guidance.
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However, you should keep in mind that a trust is a complex legal
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document full of little things that can come back to haunt you.
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With that said, the first step is to decide you want a trust.
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Once that decision is made most people opt for the revocable
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living variety. Before visiting your estate planning attorney, you
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need to decide who the successor trustees will be. Successor trustees
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are the people who will take over during your periods of incapacity and after
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you're gone. You can pick different people for different situations.
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For example, you may pick your spouse and your son who is
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a financial advisor, then finally your oldest daughter. You also need to
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think about what property you want to put into the trust. You need to
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weight the pros and cons about each item of property before
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putting it into the trust. You may opt to keep your cars out because they are typically
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short term items. But you may decide to put your collectible car in
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because you will keep it a long time. Your attorney can help you with these
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decisions. Once you decide the successor trustees and what property
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you want in the trust it is time to visit with an attorney that practices
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almost, if not completely, in the area of estate planning.
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The attorney will draw up the trust to match your desires then help you put all your
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property into it.
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You need to revisit your trust anytime you have a major family change or event.
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or every five years, whichever is sooner. Events after which you should
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revisit your trust include marriage, divorce, adoption,
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birth of a child, graduation of a child, your graduation
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or a spouse's passing.
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A revocable living trust is classified by the IRS as a grantor trust.
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This means that as long as the original grantor is alive, income tax
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is paid by the grantor and not the trust as a separate entity.
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This is a good thing because the tax rate on trusts are not as favorable as personal tax rates.
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If you have questions about what we are talking about today, estate planning questions,
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probate questions, questions in general, or just want to talk
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go to http://www.PlanWithGary.com. You can setup a time to talk
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in person or on the phone. http://www.PlanWithGary.com.
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You can also call or text 479-717-6300
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Thanks for watching today.
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