Probate can be avoided
Probate is the legal process of distributing property from one who has died to others. During the process, property is distributed and claims are resolved. Most always, there are attorney fees as well as court costs associated with taking a will through probate. In addition, those who are to receive the proceeds of a will are unable to receive those proceeds until a probate court has allowed them to be distributed. This process can tie up the proceeds from a few months to several years.
If your heirs bring your will to your bank and attempt to withdraw money after your death the bank will not allow the funds to be touched until the probate court grants the bank permission. With a properly drafted living trust, on the other hand, those who you name in the trust can generally go to the bank, bring a copy of your trust along with their identification and your death certificate and withdraw funds immediately in accordance with the trust agreement.
Lawsuit protection Lawsuit protection can be given to married people when assets are held between two trusts. Assets in a properly drafted trust for the wife can be insulated from the acts of the husband, for example.
Sheltering your estate
You can to shelter all or a large portion of your estate when you have conformed to sections 2056 and 2041 of the IRS tax code.
Having property or money in your revocable living trust does not require you to change your federal tax filing. It is analogous to you wearing a different colored hat. You simply file your taxes the same way you did before you had your trust.
There are two ways to put property into a trust.
You change the title to the property. For example you go to your bank, bring your trust document and ask the banker to transfer your accounts into your trust. You can also fill out a simple “quit claim deed” and transfer your real estate from your name into your trust.
You list the property on a “schedule ‘A.’” A schedule “A” is a piece of paper that is usually attached to the back of your trust. It simply describes the property that you would like to have included in your trust. For example, “The brown china cabinet” or “The red antique clock from Germany” or “My Hewlett Packard printer model # JJ54436.” Each time you change your schedule “A” it is best to also have it notarized. Many people update their schedule “A’s” once a year or when they buy expensive items.
It is often best to do both of the above when possible. For example, ask your banker to change the title to your bank account into the name of your trust and also list “Bank of America account # 00533-01242” on your schedule “A.”
You can modify your revocable living trust at any time. You can be the trustee. (The trustee is the one who manages the trust and holds legal title to the property in the trust for the benefit of another person - or himself/herself - and who is required to follow the directions outlined in the trust document.) That is, you can control your trust. You can change the beneficiaries as many times as you like. (Beneficiaries are those who receive the proceeds of your trust— usually upon your death.) If you like, you can have another person or company act as the trustee to perform the duties under your direction. You can also change who the trustee is at any time. You can put money or property into your trust or take it out of your trust.
Many people who have real estate holdings title each property in the name a different trust. Then they have a company who provides trustee services stand in as the trustee. The trust has a name that is not associated with the one who had the trust set up (for example, Companies Incorporated. Trust # 24775) so if anyone does a title search in the public records, the one’s name who holds the beneficial interest in the property does not appear.
Owning property in a revocable living trust does not provide you any more actual lawsuit protection than owning the same property in your own name. That is why many use the living trust in combination with an asset protection device. Many people hold title to their limited partnerships in their trust. For example, the parents hold their 15% general partnership interest in their trust. Then their children share the remaining 85% limited partnership interest.
Though the trust does not provide asset protection from personal lawsuits, a properly structured limited partnership does (see above). Then, when you pass away, your general partnership interest can go to those whom you name, such as your children, without having to go through expensive and time-consuming probate procedures.
We highly recommend that you review all trusts in detail with a knowledgeable estate-planning attorney before implementing them into your estate and/or financial plan. Laws vary and change from time to time and your specific needs may vary.