Articles

Revocable Living Trusts

by William King Self, Jr., CELA

1. What is a Living Trust?

A “living trust” or “revocable living trust,” is a document that a person (usually called the “grantor”) sets up to own and manage his property during his lifetime, and which is used to distribute his estate when he dies. The grantor usually appoints himself as “trustee,” and may also appoint another person as co-trustee to help while he still has capacity to make decisions, but who continues as sole trustee when the grantor is no longer able to function as trustee. A successor trustee should always be named in the trust. When the grantor dies, the remaining or successor trustee distributes the estate, and may continue to manage the trust for the benefit of the grantor’s beneficiaries. Living trusts are almost always revocable by the grantor while he has the mental capacity to act. A short will, called a “pour-over will,” is also executed with the trust to take any assets that failed to transfer to the trust during his lifetime and put them into the trust after his death.

2. Do you need a living trust?

Maybe not. It depends on the types of assets you own. Some people pay a significant amount for living trusts just to avoid probate of their estates, when they really don’t need a trust at all. In Tennessee, no trust is needed, and no formal probate estate may be needed, even if there is a will, if the decedent had no real estate and less than $25,000 in value of personal property. The decedent’s representative could execute a “Small Estate Affidavit” and file it with the Probate Clerk. And no trust or probate is required when all assets of the decedent were held in the name of husband and wife together, since the assets automatically pass to the surviving spouse when one dies. There are some situations where a trust is likely better than probate. For example, if you have real estate outside the state where you live, a trust may save the cost of additional probate in those states.

3. Management Trusts.

Living trusts are useful for older or disabled clients who have investment assets. They are also particularly useful for someone who owns real estate in other states. These “management trusts” are highly recommended for the right kind of client. By putting all the assets in trust early while the grantor is able to identify assets and explain how he wants them managed, the later management by a co-trustee or successor trustee will be much easier.

4. Trusts Require Changing your Habits.

The key requirement for successfully using a living trust is titling all your assets in the name of the trust. Unless you are willing to adjust your habits and keep everything in the trust’s name, from bank accounts and CD’s to rental property, autos, and brokerage accounts—you really shouldn’t have a living trust. You’ll leave something out that would make probate of the will necessary anyway.

Prepared by:
William King Self, Jr.
Certified Elder Law Attorney
Apperson, Crump and Maxwell, PLC
6000 Poplar Avenue, Suite 400
Memphis, TN 38119
(901) 756-6300
www.elderlawmemphis.com