Living revocable trusts are not just comprised of money, but also real estate, family businesses or other valuable assets, so there is no set amount of money required to open one, aside from the fees you pay someone to set it up. However, the time and money required to set one up is usually substantially more than a will, so it’s important to understand what benefits a living trust provides, and whether it’s the right option for you, before beginning the process.
What is a Revocable Living Trust?
A revocable living trust is a legal document that includes all your investments, assets and beneficiaries, along with specific instructions on how you want your assets managed before and after death. A revocable living trust allows you to “revoke,” or alter the terms or add assets to the trust while you are alive. After your death, the trust becomes irrevocable, which means changes to the document are not permitted. Keep in mind that even if you have a revocable living trust, you will still need a pour-over will, which instructs your executor – the person responsible for making sure the terms of your will are carried out -- to transfer the assets you didn’t into the trust after your death.
The Benefits of a Trust
One of the biggest benefits of a living trust is that in most states it allows heirs to avoid probate, which is the legal process of certifying a will’s validity. Probate procedures can cost up to 10 percent or more of your estate, which is why a trust is a good idea for someone with substantial wealth; it preserves more of the estate for the heirs. A living trust can be beneficial to those with young children, since it will hold money until a child reaches a certain age. It also gives you the option to have a third party sort through your affairs, which can lessen the burden on your family.
Setting Up a Trust
When you set up a trust, you transfer all your assets into the trust and list yourself -- or someone else -- as the trustee and name a successor trustee who is responsible for the trust after your death. For most people, the best way to set a revocable living trust is through an estate-planning lawyer, especially if you have a complex estate. The setup fee can range from $750 to more than $3,000, depending on the assets you want transferred into the trust, the complexity of your trust and the state where you live. If your estate is fairly simple, you can draft your own trust online (see "Resources"). If you choose to handle the trust yourself, you should still have a lawyer review the document. Once you set up the trust, you are responsible for titling any new assets, including new homes and cars, in the trust’s name. Leaving out even the smallest amount -- for instance, $10,000 in Virginia – will force your heirs to go through probate.
Is a Trust Right for You?
A revocable living trust usually works best for someone who is older than 60, because the paperwork can be more complex if you are younger. However, there is no age restriction for opening a trust. A living trust is beneficial if you have a complicated estate, or multiple marriages with children from both. It is also useful for people who have out-of-state real estate, because it will keep heirs from going through probate in multiple states. Those with a family business should also consider a living trust because it allows the trustee to operate the business without court approval. If you’re unsure if a trust is the right option, you may want to consult a financial adviser, who can help you determine the best plan for you and your estate.
Michelle Payne has been a professional journalist since 2003. Specializing in business topics, she has been a freelancer for "The Baltimore Sun" and several American City Business Journals publications as well as an editor for The Motley Fool and managing editor of "Independent Agent" magazine. Payne graduated from Ohio State University with a B.A. in public-affairs journalism.