What Is a Revocable Trust | Minnesota Law

by Flanders Law Firm LLC on January 5, 2018

What is a revocable trustWhat is a revocable trust?

When most people think about estate planning, their first thought likely involves creation of a will. Others may realize the importance of a living will/healthcare power of attorney or even a financial power of attorney.

Once the bare minimums have been accounted for, its rare for most people to think any further. Thats unfortunate, because there are a wide array of estate planning tools that exist and could be used to the benefit of a large number of people. Many people are simply unaware of their existence and end up missing out on potentially important tools that can be used to save time and money.

A revocable trust is one such example. Revocable trusts are referred to in a number of different ways, which can make discussions surrounding their use confusing. Revocable trusts are also known as revocable living trusts, living trusts, inter vivos trusts, and loving trusts. Each refers to the same basic estate planning tool. For the sake of argument, well go with revocable trust.

So what is a revocable trust?

A revocable trust is a trust that is created during a persons life (hence the name living trust). The trust is then used to help manage your assets, allowing you access to the items, while offering some protection. These kinds of trusts are helpful if you become sick or disabled as they allow for someone else to manage your assets while you are still alive. They can also allow for the distribution of assets once you have passed away. Though revocable trusts do many wonderful things, they do not help in avoiding estate taxes. The reason is that they are revocable, meaning the person who created the trust still has access to the underlying assets contained in the trust. For this reason, estate taxes still apply. That said, revocable trusts are helpful in allowing assets contained within the trust to avoid the probate process.

How does it function?

A revocable trust is created during a person’s lifetime and requires placing assets, whatever you choose, inside a trust. The trust is then overseen by a trustee who manages the property contained in the trust. While you are alive you are able to manage the trust yourself, appointing yourself trustee, though this isn’t required. You can also appoint a co-trustee to share the administrative burden and benefit from someone else to manage your affairs in the event of your incapacity. After you’ve passed away, the trustee is usually required to either distribute the assets of the trust according to your wishes or, if you choose to keep the trust up and running, to manage the assets on behalf of your beneficiaries.

How is it revocable?

Revocable trusts mean just that, they can be revoked by the person who initially created the trust at any time and for any reason. This is one of the reasons revocable trusts are popular. As opposed to irrevocable trusts, which cannot be undone once established, you always have the ability to change your mind with revocable trusts. If your plans change, if your family grows or shrinks, you can amend your trust while you are still alive to reflect these new realities.

Minnesota Living Trust Lawyer

An experienced Minnesota estate-planning lawyer can help walk you through the probate process, answering questions along the way. For more information on estate planning in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.

Source: “Revocable Trusts,” published at AmericanBar.org.

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Minnesota Estate Planning

Titling and Deeding of Property in Minnesota

It’s not uncommon as people age to start considering strategies to either avoid probate or limit assets that could be taken to pay medical/nursing expenses.

One of the most well-known strategies is to simply add your child’s name to the deed of your house. Though the strategy is designed to protect your assets, it can go wrong and end up causing far more problems than it solves. To learn more about what happens when something simple like adding a name to your deed goes wrong, keep reading.

First of all, let’s talk about the point of adding a child’s name to your home deed. The goal is to avoid the costly and time-consuming probate process.

One easy way to avoid probate is to jointly hold property with your children (or any other beneficiaries) with the right of survivorship. This way, if and when you die, your heirs will inherit your property automatically and without needing to submit to the probate process.

Though it sounds like an easy solution to probate problems, there are a number of opportunities for this to go bad. One common one is if your child encounters credit problems. Because he or she is listed as a co-owner of the property, he or she will be treated as one from a legal perspective. If creditors come after your child, they can go after his or her interest in your house, potentially putting your home at risk.

Divorce Law and Estate Planning

The same is true if your child goes through a divorce or owes back taxes or is in a bad car accident and owes money to injured victims. In these cases, your child’s ownership interest can become a serious liability for you. Finally, adding a child’s name to your deed can also create problems associated with gift tax and Medicaid eligibility, a reason to consult an expert before moving ahead.

Beyond these issues, adding a child to your deed can create real legal headaches if you and your child disagree about what should happen to the house while you are still alive. Once you take the step of adding your child’s name to the deed of your home, you can’t just pretend it didn’t happen if you later run into trouble. This is a legally significant step and your child immediately owns half an interest in the property. That means that if you want to sell the house, refinance your mortgage or take out a loan against the house you will need your child’s consent. Even more troublingly, your child could sell his or her interest in the property to a third party without your consent.

If one of these nightmares comes true and you realize you’ve made a mistake, is there any way forward? If the deed has been changed and your child won’t willingly agree to removal, the only way to solve the problem is to sue him or her for partition. This involves going before a judge and asking the court to divide ownership in the property. The court would look into how the property was purchased and maintained and then decide the best way to split things up.

The problems with partition are numerous. It puts a share of your home at risk, the judge could always decide that your child deserves more than you expect. It’s also a very lengthy and expensive process, involving attorneys and court filings. It may involve a probate. You may prevail in the end, but expect a long and aggravating fight.

Minnesota Estate Planning and Deed Lawyers

An experiencedMinnesota estate-planning lawyercan help walk you through theprobate process, answering questions along the way. For more information on estate planning in Minnesota, along with a variety of other topics, contactJoseph M. FlandersofFlanders Law Firmat(612) 424-0398.

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