People in North Dakota and Minnesota who create an estate plan will almost always create a revocable living trust as a part of that plan. Modern estate plans rely heavily on revocable living trust because they offer such effective probate avoidance benefits. Few people have to worry about the potential impact of estate taxes anymore, but probate costs and time expenditures can still be significant. A revocable living trust gives you the ability to mitigate these concerns.
However, even though these trusts are so useful, a lot of people are not clear about how they work. To help you understand what revocable living trust is and how they help you, we’ve come up with this brief list of tips.
Living Trust Tip 1. Think of your trust as your own little corporation.
A corporation doesn’t really exist anywhere other than on paper. While there might be employees, corporate offices, and property the corporation owns, it’s entirely a legal creation.
So too is your revocable living trust. Think of your trust as a kind of corporation designed to perform some specific tasks. When you create your trust, you get to create the terms under which it operates, just like you would if you are creating a corporation with bylaws and operating rules.
Living Trust Tip 2. You control your living trust.
A trust, like a corporation, can legally own property. It must also be run by someone who doesn’t own that property personally, but manages it on behalf of the trust. Like a CEO of a corporation, the person who runs the trust, called the trustee, has a duty to manage the trust property responsibly.
When you create a revocable living trust you will almost always serve as the trustee. This means that it will be your responsibility to manage the trust property on behalf of the beneficiary. The beneficiary, like the shareholders of the corporation, is the person who gets to benefit from, or profit from, the property the trust owns.
The important distinction between the corporation and a living trust is that you will also serve as the beneficiary of the trust you create.
Living Trust Tip 3. You control the trust property.
When a living trust owns property, that property can avoid the probate process. Contrast this with property you leave behind that you own as an individual. Such property will have to go through probate before new owners can take possession. So, when you transfer your individually owned property into the trust’s name, the trust becomes the new legal owner.
Remember though, that because you created, manage, and benefit from the trust, the property you transfer into it is never outside of your control.