When you create a comprehensive estate plan you will be able to use your revocable living trust as a part of your incapacity planning protections. A revocable living trust, also called an inter vivos trust, or more simply just a living trust, plays a key role in protecting your estate from unnecessary probate complications. It also allows you to exert some control over what happens to your property in the event you lose capacity. Today we are going to take a closer look at why your revocable living trust can bolster your incapacity planning protections.
Your Revocable Living Trust
A revocable living trust creates a kind of legal entity that owns your property on your behalf. Because you created the trust (trustor, grantor or settlor), YOU have the ability to amend or revoke it and decide what property it owns, and you retain total control of the trust and possessions you place in the trust’s name. The vast majority of people who create revocable living trusts choose to serve as both the trustee and beneficiary of the trust, meaning they can manage the assets (as trustee) and use any property the trust owns (as beneficiary) and control it at the same time.
The big benefit of creating a revocable living trust is that, because the trust will continue to exist after your death, the property in the trust’s name will avoid the probate process. This is typically a concern for people who have large estates that might take a lot of time and money to manage through probate, as well as for people who want to keep their inheritance choices and final affairs as private as possible.
Your Successor Trustee and Your Revocable Living Trust
If you serve as the trustee of your own revocable living trust, what happens to the trust if you fall ill or become seriously injured? What happens to the trust property when you lose capacity but are still alive?
When you created your trust you should have designated a successor trustee. A successor trustee serves as the trustee once the original trustee is no longer able to. For example, let’s say you place your bank accounts and home into the trust’s name, and, as trustee, use your accounts to pay the home’s mortgage. What happens to those mortgage payments if you are unexpectedly hospitalized?
If you don’t have a revocable living trust, and no one else is allowed to use your financial assets, someone will likely have to petition a court to ask it to name a guardian or conservator for your affairs. If you have a durable power of attorney for finances your agent can manage your assets for you, but only those assets that are not in the trust’s name. But, if you have a revocable living trust that names a successor trustee, that person can begin managing trust property as soon as you lose your abilities, without need of additional documentation or court involvement.