As an expert in the field of estate planning, I'm often asked who can set up a revocable living trust. The answer is simple: any competent adult can establish a revocable living trust. This article will explain the three steps involved in setting up a revocable living trust, as well as the differences between an active trust and an irrevocable living trust. The first step in setting up a revocable living trust is to appoint a competent adult, bank, or trust company as trustee.
This type of trust is designed to protect children with substance abuse problems, chronic debt problems, or chronic gambling problems by providing them with a safe place to live without giving them enough money to make their habit worse. The second step is to transfer assets such as bank accounts, investment accounts, and real estate to the trust by retitling the assets in the trust's name. Because the grantor maintains control of an active revocable trust and can change or cancel it at any time, all assets in the trust are still considered the property of the grantor. This means that if you establish an active trust and transfer assets to the trust, probate courts may not oversee the distribution of those assets when you die.
A revocable living trust offers a quick, private, and unlegalized way of probate to transfer property after death. The Internal Revenue Service (IRS) classifies a revocable living trust as a “grantor trust”. This means that all assets in the trust are still part of the grantor's estate, which is why revocable living trusts don't offer much of a reduction in income or wealth taxes. You can also create an irrevocable living trust, but this type of trust cannot be revoked or changed and is done almost exclusively to obtain certain tax or asset protection results. After you establish the active trust or the revocable living trust, you still have to transfer assets to the trust. Depending on how complicated your estate plan is, working with financial professionals or lawyers can make active trusts expensive and often more expensive than establishing a will. You cannot take back any property held in an irrevocable living trust unless you first obtain permission from all the people named in the trust.
A revocable active trust or an active trust also allows for smooth transition planning if the grantor becomes incapacitated. In conclusion, any competent adult can set up a revocable living trust. This type of trust offers many benefits such as avoiding probate court proceedings and providing protection for children with substance abuse problems. However, it is important to understand that there are differences between an active and an irrevocable living trust and that working with financial professionals or lawyers may be necessary for more complicated estate plans.
