Revocable Living Trusts

Question 1

What critical step is often missed after the creation of a revocable living trust (RLT)?

Answer 1

Funding the trust. Without legal registration of assets in the name of the trust, heirs will need to go to probate to get the assets moved into the trust post-mortem, defeating a key goal of the grantors.

Question 2

Why is RLT (revocable living trust) superior to a durable power of attorney?

Answer 2

Many institutions will not honor a DPOA without a court order. An RLT with a properly executed transfer to the successor trustee generally avoids this problem. When the grantor can no longer serve as trustee due to incompetency, disability/illness or deaht, the successor trustee takes over. Note - It still makes sense to have a DPOA even with a trust however.

Question 3

T or F

A RLT does not remove assets from the estate of the grantor while the grantor is alive.

Answer 3

True. This is because the grantor retains complete control over the assets.

Question 4

T or F

An RLT provides no protection for grantor’s assets from creditors

Answer 4

True. All trust assets still belong to the grantor, and therefore are accessible by creditors.

Question 5

T or F - An RLT can provide for the creation of a testamentary trust upon death.

Answer 5

True. A testamentary trust is legally always a irrevocable trust that can be used to provide financial resources to a children, spouses, and others within a set of rules determned by the grantor.

Question 6

T or F

Revocable trusts are always considered grantor’s trusts

Answer 6

True. This is because the grantor can buy or sell assets, trustee selection, beneficiary designations, can dissolve the Ted etc.

Question 7

Under what circumstances is an irrevocable trust considered a grantors trust?

Answer 7

If the person creating the trust retains any income, remainderman, or other financial interest in the trust.

Question 8

What is the Latin term for a living trust?

Answer 8

Inter vivos

Question 9

How does the status of a living trust change when the grantor dies?

Answer 9

Without exception, it becomes irrevocable. This is because the grantor is no longer alive to control it.

Question 10

If a living trust is not properly funded while the grantor is alive, what options do heirs have after the grantor dies?

Answer 10

It is possible to get the assets moved into the trust, but doing so requires going through probate, which largely defeats the purpose of the trust.