To recap part 1 of this series – a revocable living trust (RLT) is a legal document that allows you to control what will happen should you become incapacitated or die. Unlike a Will, a living trust is effective the day you sign it and can provide protection should you become mentally or physically incapacitated, your family may have to ask the court to take control of your assets and appoint someone to conduct your affairs in your stead.
So, Why Would the Court Get Involved at Incapacity?
Basically, if you can’t conduct business due to incapacity (even a temporary incapacity) and haven’t made other arrangements only a court appointee can conduct your business in your stead. Unfortunately, once the court gets involved, it tends to stay involve until either you recover or die. Basically, this is a “living probate” and can be public, time consuming, expensive, and does not replace a normal probate after your death.
Doesn’t a Durable Power of Attorney Prevent This?
It can to some extent – a durable power of attorney does let you name someone to manage your finances, many institutions will not honor one if it is not on their specific form. The other problem with a durable power of attorney is that if honored, it can work too well, giving the holder a “blank check” to do with your assets as they will. While it can be an effective tool when used with a living trust, it is risky when used alone.
How Does a Living Trust Avoid All This?
When you establish your living trust, you transfer your assets from your name to the name of your trust. Legally you no longer own anything – your trust owns everything (and you control your trust) – so, there is nothing for the courts to control when you become incapacitated or die. This simple, proven concept keeps you and your family out of the courts while still keeping you in full control of your assets. As trustee of your trust you can do everything you could do before (buy, sell, trade your assets, change or cancel your trust). You even file the same tax returns. The only thing that changes is the name on the titles.
If you would like to discuss your estate planning needs, Cameron Law is here to help.
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- About Living Trusts – Part 1 “Introduction to living trusts“
- About Living Trusts – Part 3 “Trustees and Taxes“
- About Living Trusts – Part 4 “FAQ’s“