Becky Cholewka: Hello everyone! I get a lot of questions about revocable living trusts. There’s a lot of misconceptions out there about what they do, or don’t do, or how we utilize them.
For example, when we have a revocable living trust just so you know the trust maker, the person who created the trust, is not giving up control over their assets. I get that a lot, where people are afraid that if they do a trust they’re actually giving up control, and that’s not the case.
You are actually, as the trust maker, still, the person that controls the money decides how to spend it. It’s just you and your Social Security Number and your accounts. It’s just now that some of your accounts will be titled in the name of your trust.
Getting back to the Social Security Number. Because your revocable living trust is just you, and we’re using your Social Security Number at all of your financial institutions to open your accounts, there is no separate tax return that you’re going to have to do for your revocable trust.
Now, once a trust becomes irrevocable in its life, you will have to potentially create a new tax ID number, depending on how your trust is structured as well. While you’re alive and using your own revocable trust, you don’t need to file a separate tax return. It’s just you and your money.
Another question I usually get about having a trust is, “Well does that mean I’m protected?” Well, no it doesn’t.
Because you have full control over your money, let’s say you get in a car accident and get sue, your creditors can still sue you for any assets that are titled in the name of your trust. While you are alive, your own revocable trust does not provide asset protection for you.
Now, trusts are great and I always hear, “Oh Becky, I have this trust and now my family’s going to avoid probate.” Hopefully, and the reason I say that is having a trust is actually a two-step process.
We first want to make sure that you are creating a strong and comprehensive trust document itself. That’s only step one. Step two is we need to make sure that we are actually titling all of your assets properly through your trust.
It’s very strategic. Some of your assets will go in right now while you’re alive, and some of your assets will go to your trust after you pass through a beneficiary form.
For example, your IRA might say, “To my spouse, as the first beneficiary, and to my trust, as the second beneficiary.” It’s more technical than that, but some of your assets are in your trust now and some go in later.
If we don’t do that second step, and if we don’t actually put all of your assets through to your trust properly, it still may mean that your assets are going to go through the probate process.
We want to make sure when we have a trust that, not only do we create the trust document, but we also now fund it properly as well. If you’ve created a trust, and your attorney did not help you fund it, and you wanted to make sure that that second step is done properly, that is something we do in our office.
Feel free to call us for funding assistance, you can make an appointment by calling us at (480) 497-3770.
