A well written and fully funded revocable trust allows your beneficiaries to avoid probate while giving you control over your assets during your lifetime and managing their use and distribution after you die.
While you are alive and have the mental ability to manage your affairs, your trust is completely subject to your control. After you become incapacitated, and when you die, your trust becomes irrevocable, and its terms are enforceable much like those of a will. But because it is a private legal agreement, its administration is private, and not subject to the public process that governs estates where there is only a will, or where there has been no estate planning at all. This keeps your beneficiaries out of court and makes it possible for your wishes to be honored quickly and privately, ordinarily within days or weeks, instead of years after your death.
The Commonwealth Life & Legacy Counsel team has years of experience creating and managing trusts as part of their estate planning and elder law services. Let them give you peace of mind when creating a legacy for your loved ones.
What Is a Revocable Living Trust?
A revocable living trust is a legally enforceable agreement you make with yourself, or together with your spouse, which you, or both of you, can change or revoke (eliminate) during your lifetime. The simplest way to think of it might be to imagine that it is a vessel or a vehicle which provides a convenient place to keep your assets, which you manage within the trust as your own trustee. You get to pick your successor trustee, who will manage those assets in the trust when you are no longer able, whether because of your eventual infirmity or death. But because the trust itself won’t die until it terminates according to the terms you dictate it will never need a probate to determine who will have the benefit of your assets. You, as the author or “grantor” of the trust will have already determined, with the help of your attorney, what should happen to the trust’s assets. All that is required when you are no longer able to act as the trustee is for the successor trustee, someone you have chosen, to take your place as trustee and manage the assets according to the rules you have put in place.
Once you are no longer able to manage your trust (as your trustee) the terms of the trust become irrevocable. This is what makes the trust powerful, and in some cases vital. For example, if you and your spouse have children outside your marriage, and your intention is for your spouse to have the benefit of your entire estate after your passing, but to leave what remains to all of your children, the only enforceable way to do that in Virginia is to use a trust. This is easy to understand when you think of what happens when you give a gift, whether in person, or through a will. Once a gift is given, it belongs to the recipient, and he or she can do with it what they please, even if they once promised to leave it to your children when they die. That promise cannot be enforced, except through an enforceable agreement of both spouses. That agreement, in Virginia, is a trust. A will won’t work because everyone has the right to change his will as long as he or she has the legal capacity (the mental ability to competently) do so.
Avoiding the Probate Process with a Revocable Trust
Probate is the process by which the court transfers the ownership of assets of a dead person to a living person or other legal entity, such as a charity. If you own anything when you die, a probate is necessary because dead people cannot own things in Virginia.
But a trust, as pointed out previously, doesn’t die. It’s a legal entity, not a natural person. But it can own property (sort of like a corporation or a limited liability company, or LLC can), and it can, by its own terms, dictate what happens to that property at your death, and it can do that without having to be subject to the court in a probate process. But the assets changing hands, or changing beneficial ownership, through a trust must be owned by the trust. That is what “funding a trust” means. A trust is funded when the property you own is transferred to the trust’s ownership, either while you are still alive, or automatically at your death by virtue of a beneficiary designation, or a “pay on death” or “transfer on death” designation, for assets that have such an option.
And every estate plan centered around a revocable living trust will also include a will, the primary purpose of which is to “pour over” the asset which you still own, if any, at your death, into your trust. Such a will would also name a guardian for your minor children, if you have any, but this is why estate plans using trusts still must include a will – so that your trust can operate privately on whatever assets you owned during life, and the probate court, or the public, need not know what your plan for those assets is.
If your trust is fully funded, in other words, if it owns everything you did while you were alive, either because it was funded before death or automatically at your death, the administration of your estate can begin immediately in the privacy of your attorney’s office, by the certification of your chosen successor trustee with a simple one-page document.
Asset Protection in a Revocable Trust
Your creditors have the same access to your assets as you do. This means that because you have complete access and control of the assets in a revocable trust you create, your creditors can still reach them. Don’t be misled by people who tell you that a revocable trust gives you “asset protection.”
But once that trust becomes irrevocable, ordinarily at your death, those who inherit them in trust can enjoy a significant level of asset protection. This is because if you leave your assets in trust to another person, your lawyer can specify limitations on how those assets may be used. This includes a limit that would prevent those assets from being paid to a creditor, such as an ex-spouse, or the government, or a judgment creditor resulting from a lawsuit.
This protection can be provided even though the same guidelines allow virtually unlimited use of the funds by the beneficiary for their health, education, maintenance, or support. This is a special way that with a little planning can provide peace of mind not only to you, but to those who inherit your assets from you, like your surviving spouse or children or grandchildren, who can have a legacy that is protected in ways their own assets cannot be.
Contact the Virginia Trust Attorneys at Commonwealth Life & Legacy Counsel
The experienced trust attorneys at Commonwealth Life & Legacy Counsel have helped clients with estate planning and elder law in Virginia for nearly ten years. Schedule your free consultation and discuss whether a revocable trust is a good fit for you.