DO I NEED A REVOCABLE LIVING TRUST, IN KANSAS CITY MISSOURI?
Feb. 27, 2018
Well hello, and thanks for stopping by!
Before I discuss whether you need one, I need to explain what a revocable trust is.
WHAT IS A TRUST?
A trust (for those who don’t know) is basically a fictional entity that you create so people know what to do with your stuff after you die. You pick someone to act as your trustee (the person who runs the trust), you pick people to be beneficiaries (the people who get stuff from the trust), and you leave instructions on how the beneficiaries get the stuff you put in the trust.
There isn’t any magic formula to making a trust, but over time there have been some rules the courts have created to make sure you get what you want. Which is where an estate planning attorney comes in.
There are basically two kinds of trusts, revocable (you can change it or get rid of it later) and irrevocable (it is the way it is, I hope you like it).
The revocable “living” trust has become an extremely popular estate planning technique. It allows you to avoid probate (which takes forever) and it might let you avoid some estate taxes as well, if you create it correctly. You can make sure that your kids get your IRA, you can set up a guardian who takes care of your kids (if they are minors), you can decide to make your kids wait until they are 25 (or 30, or 75, or whatever age you pick) so they are mature enough to handle what you’ve left them.
For those of you interested in a technical tidbit, the two trusts are only revocable and irrevocable. “Living” is a term people have used to explain that you can change the trust after it has been created. So if you have a revocable trust and you meet an estate planner who wants to revoke it… well, you’re probably going to be wasting a lot of time and money with them. You don’t actually need to revoke a revocable trust, you can just amend it and make it better.
DO I NEED A TRUST?
Well, probably. A lot of people think they should wait to do some kind of estate planning. The reality is, you already have an estate plan! It’s the one the State of Missouri uses for all of us. Your family goes to probate, they wait forever to find out what is happening, they spend a lot of money, and eventually, they get whatever is left.
It’s not a particularly GOOD plan, but it is a plan, and it is one that I would advise any of my clients to avoid. If you have spent time creating something you want to pass on to your loved ones, then you should spend the time to protect what you’ve created.
If you have children, if you own a business, if you own a house, or have a retirement account, then you probably need a trust.
If you have kids, then you need a guardian. If you don’t pick one, the court will choose one for you (and you might not like who they select).
If you own a house, the court may force it to be sold rather than leaving it to your children.
If you have a business, they may close it and split it up, sell it off, or prevent your children from owning it.
As it turns out, most people probably need a trust (and a will, but that is a different discussion).
ALRIGHT, SO HOW DO I MAKE A TRUST?
Setting up an appointment with an estate planning attorney is a great start. You need to meet with them and discuss all of the issues that could come up, what your needs and priorities are, and how to best address them.
This may take a little time, and you want to make sure it is done right. When it comes to trusts, the most important things that we do for our clients include: (1) creating the trust, (2) registering the trust with the state, (3) making sure the trust is funded when it needs to be funded.
Once the trust has been created, it’s time for your estate planning attorney to work with your financial advisor so that they can make sure everything is done correctly and that your assets are where they should be.
Unfortunately, many well-crafted estate plans have been wasted simply because they weren’t funded. In such cases, your beneficiary still goes to probate, despite all the time and money you spent trying to protect them.
I know this may seem overwhelming, but honestly, most of the work is on me (or whoever you choose as your estate planning attorney). All you need to do is explain your situation, make sure you are honest about your needs, and let us figure out the rest.
If you have any questions, please let me know. Or, you can take a look at some of our older posts and see if they answer any of your questions.
Thank you for reading!
Good luck out there.