Establishing and Funding a Single or Joint Revocable Living Trust
A revocable living trust is an estate planning document that allows you to dictate how your assets will be administered and distributed after your death and when you are incapacitated.
A trust is created by drafting and signing a trust agreement between you, the trust Grantor, and someone who will manage the trust, referred to as the Trustee. You must then transfer your assets from your name to the name of your trust, where they will be managed by the Trustee on behalf of those who will benefit from it, the trust Beneficiaries.
Typically, the Beneficiaries of your trust will receive income from the assets held and managed in the trust. You, your spouse, your children, charitable organizations, and others can all be the Beneficiaries of your revocable living trust.
A Single Revocable Living Trust vs. A Joint Revocable Living Trust
A revocable living trust may be created by one person (a single revocable living trust) or by two people (a joint revocable living trust). Joint revocable living trusts are usually created by married couples.
Joint revocable living trusts are frequently used to facilitate the transfer of assets from one spouse to another when one of them passes away. But, just like a single revocable living trust, a joint revocable living trust can name other beneficiaries as well.
A joint revocable living trust comprises one trust agreement that creates two revocable living trusts – one for each party’s estate. Joining two revocable living trusts together in one document can save a couple time and money because they only need to pay an attorney to draft one document.
Joint revocable living trusts are especially advantageous in community property states like Texas, Arizona, New Mexico, California, Nevada, and Louisiana. In these states, any assets that are held in a joint revocable living trust will be considered joint property in the particular state where the couple resides. This, in turn, creates certain tax advantages.
What Does Revocable Mean?
A revocable living trust is one that can be modified, amended, or revoked at the grantor’s discretion, as long as he or she is alive and well. This type of flexibility is attractive to many people because it offers the Grantor the freedom to add or remove assets from the trust and/or adjust the terms of the trust agreement as needed.
After the Grantor of a revocable living trust dies, the trust automatically becomes irrevocable, since it can no longer be modified, amended or revoked.
Irrevocable trusts do not appeal to as many people as revocable Trusts. This is largely because once the Grantor transfers property into an irrevocable trust, he or she relinquishes control and access to those assets and can no longer move assets in and out or modify the terms of the trust.
That said, an irrevocable trust provides a great deal of asset protection and is still very useful for probate avoidance. Probate can be time-consuming and expense and should be avoided wherever possible.
Funding a Revocable Living Trust
A revocable living trust can dictate the management and distribution of your assets when you are alive and well, if you become incapacitated, and after you pass away. A revocable living trust can also enable your assets to bypass probate and be distributed directly to your Beneficiaries upon your death, saving both time and money.
However, your revocable living trust will only work as it is intended if you transfer your assets into it. This is referred to as funding your trust.
Your revocable living trust can only dictate the management and distribution of assets you put inside of it. Any assets left outside of the trust when you die, and that are not otherwise addressed, will need to go through the probate process before ownership can be transferred to your heirs and loved ones.
Funding a revocable living trust isn’t very complicated. You simply need to transfer ownership of your assets from your name to the name of the trust.
Transferring ownership of some assets, such as bank accounts and vehicles, is usually easy to do on your own. But, you may need the help of an experienced estate planning attorney to help you properly fund your trust with assets such as real estate, businesses interest, and securities.
You can also designate your revocable living trust as the beneficiary of your life insurance and other Pay-On-Death and Transfer-On-Death accounts. This way, your trust will dictate how the proceeds from these accounts will be distributed to their beneficiaries.
Transferring Property into a Joint Trust
Transferring property that you own separately from your spouse into your joint revocable living trust will render it joint property. This could complicate the distribution of your assets if you and your spouse were to separate down the line.
Similarly, transferring joint property into a single revocable living trust destroys the joint tenancy aspect of that property. Which can also result in unintended consequences.
For example, if you and your spouse own your home as joint tenants, and you transfer the home into a single revocable living trust owned by your spouse, you will lose your interest in that home. However, if in the same scenario, you and your spouse were to establish a joint revocable living trust, and transfer the home that you own jointly into it, joint tenancy will be preserved.
Bear in mind, if your goal is simply probate avoidance, there would be no need to transfer the home into any trust, since ownership of the jointly held home will automatically bypass probate and transfer to the surviving spouse when one of you dies.
Contact Us
A revocable living trust is an extremely useful estate planning vehicle for singles, couples, and families. If you have an uncomplicated estate, an average amount of assets, and know what you want your trust to achieve, you may be able to create a revocable living trust on your own.
However, having the assistance and guidance of a qualified estate planning professional to ensure that the trust will achieve what you intend, and that it complies with the laws that govern trusts and estate planning in Virginia can be a huge benefit.
Contact our law firm today at (703) 553-2577 or use the contact form on our website to arrange a consultation with a qualified and experienced Virginia estate planning attorney.
The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.