When you are working on estate planning, a revocable living trust (sometimes called an inter vivos trust) might be an option to consider. A Rhode Island living trust provides you with control over your assets, flexibility in their use, and privacy.
Living trusts in Rhode Island
A living trust in Rhode Island is set up by the grantor, the person placing assets into trust. Because the assets in the trust are managed for your benefit during your lifetime and then passed to your beneficiaries after you die, the goal is usually to put as many assets into the trust as you can to maximize the benefits. Some assets, such as life insurance and retirement accounts, cannot be placed in trust. You will need to select a trustee whose job is to manage the assets in the trust, however most people name themselves for maximum control. You also name a successor trustee who steps in after you die to continue to manage the trust and distribute assets to your beneficiaries. A revocable living trust can be changed by your during your life. An irrevocable living trust is permanent.
A living trust Rhode Island bypasses probate, the court proceeding that verifies and enforces a will. Probate takes months and involves the cost of an attorney, executor, and court expenses. Rhode Island has not enacted the Uniform Probate Code, so its process is not streamlined. Assets passed via a trust can be distributed immediately upon your death if you wish. Assets in a will cannot be passed until probate is finished. A trust may include assets located in Rhode Island as well as other states, allowing you to avoid probate in more than one state. If you have an estate worth less than $10,000, it is eligible for a simplified proceeding that is less time-consuming and costly than probate. This option is less expensive than creating a trust, but does not offer the other benefits a trust provides.
Do I need a living trust in Rhode Island?
Creating a living trust in Rhode Island is a matter of personal choice. Many people choose a living trust because of the control it offers. As the grantor, you continue to use all of the assets in the trust during your life as you normally would, even though they are technically in the name of the trust. Nothing in your life need change. After your death, the trust continues to control the assets, protecting them until they are distributed to your beneficiaries. You get to choose when that happens and many grantors specify that beneficiaries must reach a certain age to inherit. Wills distribute assets as soon as probate concludes.
Your revocable living trust protects you should you become mentally incapacitated. All of your assets are already controlled, owned, and managed by the trust, and a conservatorship proceeding is likely unnecessary. While a durable power of attorney can be rejected, a trust cannot be. Your financial life is protected by the trust.
Trusts offer privacy that cannot be obtained with a will. Wills become public record once probated. Your trust does not become public record. No one will know any information about your assets, beneficiaries, or trust terms. Trusts are more difficult to contest than wills, providing peace of mind that your wishes will be carried out.
Living trusts and estate taxes in Rhode Island
While living trusts offer many benefits, they do not avoid estate taxes. Rhode Island applies estate tax to estates over $1.5 million. Federal estate tax applies to estates over $5 million. It is possible to avoid estate tax with the use of a specialty trust called a QTIP, marital, or AB trust. This type of trust transfers assets from a deceased spouse to a surviving spouse with no tax. Revocable living trusts provide no protection from Medicaid spend down or from creditors’ claims.
How to create a living trust in Rhode Island
If you would like to create a living trust in Rhode Island, you must prepare a written trust document and sign it before a notary public. The trust is not functional until you take the final step of transferring ownership of assets into it. A living trust can be an important part of estate planning. Consider the benefits and limitations when making your decision.
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