Revocable Living Trusts

A revocable living trust created by Lake Oswego Elder Law can be an excellent tool to plan for incpacity in later life and quickly and privately pass on your inheritance to your family, friends and charities.  

A revocable living trust is a document in which a “trustor” names a “trustee” to manage their finances for them while they are living and after they are deceased.  It differs from a power of attorney, which expires at death.  It differs from a will, which only becomes effective at death, and ordinarily has to go through the court’s lengthy probate process.  A living trust takes effect immediately after it is signed, and continues on throughout the trustor’s incapacity or disability, ultimately passing on to family members or other people or charities the trustor chooses after he or she passes away.  Oftentimes a married couple chooses to create a joint revocable living trust to provide for smooth financial management after the first spouse passes away, and pass on their estate after the second passes. 

Ordinarily, the person creating the trust acts as their own trustee at first, but names a “successor trustee” to take over after the original trustee becomes unable to manage their own money or passes away.   The successor trustee can be a trusted friend or family member, a trust company, or another professional advisor who agrees to serve in that role.  Your successor trustee will be required to provide you and/or your beneficiaries with a detailed annual report regarding all of the money spent and/or invested on your behalf.  The successor trustee’s actions are governed by the Uniform Trust Code, prudent investor and fiduciary duty laws, and most importantly the terms we help you draft in your trust. 

A living trust can provide detailed instructions about how you want your money to be spent if you become disabled or incapacitated and require care that your friends and family cannot provide for you.   For example:

  • Do you want your successor trustee to allow you to remain at home and hire in-home caregivers as long as possible, or
  • Have you already selected an assisted living center or graduated care facility that you would prefer to move to, or
  • Do you want to apply for Medicaid long-term care benefits  or take full advantage of your Veteran’s benefits in order to preserve as much money as possible for your family members?

You can also provide instructions in your trust regarding providing support for minor or disabled children, even after your death, and include strategies to avoid or eliminate inheritance and estate taxes.  As long as you still have the mental capacity to make legal decisions, you can make changes to your trust at a later date as your life circumstances, finances or values change.

Revocable living trusts are generally more expensive to create and manage than a power of attorney and/or a will, and are therefore heavily marketed.    At Lake Oswego Elder Law, we don’t give away free dinners to try to convince you to buy a ready-made trust in a fancy leather binder.  We want to get to know you, your family, your financial situation and your values.  It may be that a simple will and power of attorney are better suited for your needs. 

One factor to bear in mind about revocable living trusts is that all of your property to be managed by your trustee, even if you are initially acting as your own trustee,  needs to be taken out of your own name and retitled in the name of the trust.  This is called the trust “funding” process.  If this is not done properly, or if these steps are not taken every time you purchase a new house, car, stock, or open a new bank account, the trust will not work as you intended it to and your estate may end up in probate court after all.  Many of the planning techniques to provide for your minor or disabled child or spouse, and even to avoid estate taxes, can be accomplished through a “testamentary trust” that is written into your will and takes effect after you pass away. 

A properly drafted and managed revocable living trust, however, can not only direct how you want your money to be spent if you become disabled and avoid probate, but can greatly reducing an elder’s vulnerability to financial exploitation and the need for a court-supervised guardianship and/or conservatorship. 

 

 

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