Anyone working on their estate plan in Minnesota should consider creating a revocable living trust. This is one of many estate planning documents that can help you better prepare for the future, outline your last wishes, and protect your assets.
Keep reading to find out when having a revocable living trust can be beneficial for Minnesota residents.
What Is a Revocable Living Trust?
Before we discuss who should consider trust planning, what exactly is a revocable living trust in Minnesota? A revocable living trust is a legal document that you can use during your lifetime by putting assets into it, otherwise known as funding the trust. Unlike some other types of legal documents, you can act as the trustee, which still allows you to continue managing your assets while protecting them with the trust.
A revocable living trust also allows you to appoint a successor trustee who will manage the trust if you become incapacitated or after your death. Also, because this is a revocable trust, you have the right to change the trust terms or revoke it at any time, for any reason.
Most Minnesota residents use revocable living trusts as a way of protecting assets from the public probate process. It also allows you to appoint beneficiaries and make special arrangements for them, as well as plan for potential incapacity.
Situations Where a Revocable Living Trust May Be Beneficial
Whether you are creating an estate plan from scratch or simply updating your estate plan, you may wonder when a revocable living trust is necessary. Although a living trust comes with many benefits, it isn’t suitable for every situation.
So, here are some examples of when you should consider adding a revocable living trust to your estate plan:
- Incapacity planning: If you’re concerned about potential incapacity in the future, a revocable living trust allows you to streamline incapacity planning. You can appoint a dependable successor trustee to act on your behalf who can manage funds without the need for court intervention.
- Avoiding probate: A living trust provides one of the best ways of avoiding Minnesota probate by protecting certain assets and providing directions regarding what each beneficiary gets. This also provides greater privacy when it comes to asset to distribution by preventing public probate records.
- Complex beneficiaries: You may require more detailed arrangements for your beneficiaries if you have a blended family or minor children. A revocable living trust allows you to provide greater provisions for your beneficiaries so that you can avoid any confusion or conflict.
- Simplified estate administration: A living trust can help simplify the estate administration process, especially for more complex estate. This is a good option for estates with multiple properties or when you want to coordinate multiple beneficiary accounts. Properly funded trust assets also make post-death transfers easier and more straightforward without the need for time-consuming and costly probate.
Potential Disadvantages of Using a Revocable Living Trust
Using a revocable living trust in Minnesota can come with many advantages, especially for larger or more complex estates. However, like any other type of estate planning tool, you might run into potential limitations or drawbacks.
Here are some examples of the potential downsides of using a revocable living trust:
- High cost: When compared to other estate planning documents, revocable living trusts have high upfront costs that you should consider before proceeding.
- Funding requirements: To get the benefits of a revocable living trust, you have to actively re-register or re-title assets and put them in the trust’s name. This often involves re-titling and re-registering bank accounts, titles, deeds, etc.
- No tax savings: Because a revocable living trust allows you to maintain control of your assets, both Minnesota and the IRS recognize these assets as yours. So, this trust will not provide you with any direct state or income tax advantages.
- No protection from creditors: Since you maintain control of your assets with a revocable living trust, this means that creditors can still initiate collection efforts. Because of this, any asset in a living trust may be vulnerable to collection efforts or lawsuits during your lifetime.
- Doesn’t replace a will: Having a revocable living trust comes with many benefits, but it does not directly take the place of a legal will. So, you still need to have a pour-over will that provides protection for additional assets as well as naming guardians for your minor children.
It’s strongly recommended that you consult with a Minnesota trust lawyer before you move forward with trust and will planning. A lawyer can help you determine if a revocable living trust is the right fit for your situation.
Get the Help of an Estate Planning Attorney Today
Establishing a revocable living trust in Minnesota comes with many benefits for a variety of situations, which is why it’s such a common estate planning tool. It’s one of the best estate planning options if your goal is to avoid probate while providing more specific instructions and provisions for your beneficiaries.
At the Waldron Law Offices, Ltd., our Twin Cities estate planning attorneys are here to assist our Minnesota clients as they create their estate plans. Contact us today at 952-471-0940 for a consultation.
FAQs
Does a revocable living trust eliminate probate?
Generally speaking, any assets you have titled properly and added to a revocable living trust don’t need to go through probate. However, assets that haven’t been properly re-titled or that fall outside of the trust may still need to go through Minnesota probate.
Can I change my revocable living trust?
Yes. The main benefit of a revocable living trust is that you maintain ownership of the assets in the trust, allowing you to make changes or to revoke the trust entirely. However, keep in mind that you can only act as the trustee if you are legally competent; otherwise, the successor trustee would take responsibility.
Do I still need a will if I have a revocable living trust?
Having a pour-over will provide protection for assets that fall outside of your revocable living trust. A will can also help you create additional provisions for your estate plan, including appointing guardians for minor children.
