People sometimes make assumptions about trusts that are not entirely accurate. There are those who assume that you surrender ownership of assets that you convey into any type of trust. This is not entirely true when it comes to revocable living trusts.
Revocable Living Trusts
Revocable living trusts are used by people who are not necessarily wealthy. With this type of trust, you can retain control of the assets while you are living. After all, as the name would imply, you can revoke the trust entirely, and it would no longer exist. The assets that were in the trust would be in your direct personal possession once again.
You probably will never want to revoke the trust, because you are creating it to facilitate postmortem asset transfers. You can act as the trustee and the beneficiary while you are living, but you name successors to assume these roles after you die.
When you create the trust, you leave behind instructions that the successor trustee would be compelled to follow after your passing. Assets would be distributed to the successor beneficiaries in accordance with your wishes.
These transfers could take place in a timely manner, because the probate process would not be a factor. Probate is a legal process that would come into play if you use a last will to state your wishes regarding the distribution of your assets.
This process can be time-consuming, and there are also expenses that accumulate during probate.
Income Tax Responsibility
In legal parlance, you are retaining incidents of ownership when you create a revocable living trust, because you still have the right to access and enjoy property that has been conveyed into it. Since you can revoke it, your control is absolute.
As a result, if property that has been conveyed into the trust was to earn taxable income, you would be required to report that income on your tax return. In some cases the trust will file a separate statement, but this is not necessary if you are acting as the trustee.
Living Trust Report
Living trusts do not provide any income tax benefits, but they are very effective for people who want to avoid probate. You can also instruct the trustee to distribute assets to the beneficiaries over an extended period of time if you choose to do so, and this is another benefit.
We have prepared a special report that takes an in-depth look at the value of revocable living trusts. This report is free, and you can access the report through this website.
To get your copy of the report, click this link and follow the simple instructions: Free Living Trust Report.
Schedule a Consultation
If you would like to discuss living trusts with a licensed attorney, contact us through this page to set up a free consultation: Grand Forks ND Estate Planning Attorneys.