A revocable living trust can seem complicated at first. Who owns the property? Who controls it? What happens if you become incapacitated? What happens when you die?

The basic concept is actually fairly straightforward: you create the trust, transfer appropriate assets to it, manage those assets according to the trust's terms, and designate who will manage and receive the trust property in the future.

For many Oklahoma families, a revocable living trust can provide a framework for managing property during life and distributing it after death—while potentially avoiding probate for assets that are properly owned by the trust.

Here's how it works.

Step 1: Create the Trust

The first step is creating the trust agreement.

The person who creates the trust is generally called the grantor or settlor. The trust agreement establishes the rules for how the trust will operate.

Your trust can address questions such as:

• Who will manage the trust?
• Who will receive your property?
• What happens if you become incapacitated?
• Who takes over when you die?
• When should your beneficiaries receive their inheritance?
• Should an inheritance remain in trust rather than being distributed outright?
• What happens if a beneficiary dies before you?

Because the trust is revocable, you can generally change or revoke it during your lifetime while you have the legal capacity to do so.

Step 2: Choose a Trustee

A trust needs a trustee to manage the property held by the trust.

With a typical revocable living trust, you can serve as your own trustee.

That means you do not have to hand control of your finances to someone else simply because you created a trust.

For example, you might create a trust, name yourself as trustee, and continue managing your bank accounts, investments, real estate, and other trust property.

You also designate a successor trustee.

Your successor trustee is the person or institution who can step in when you are no longer able to serve as trustee, whether because of incapacity or death.

Choosing the right successor trustee is an important part of creating a trust.

Step 3: Transfer Assets to the Trust

Creating the trust document is only part of the process.

You also need to determine which assets should be owned by the trust.

This process is commonly called funding the trust.

For example, if you own a home that you want the trust to control, the appropriate deed may need to be prepared and recorded to transfer the property into the trust.

Other assets may be transferred or retitled differently.

The exact process depends on the type of asset.

Why Funding Matters

A common misconception is that simply signing a trust document automatically places everything you own into the trust.

It does not.

If an asset remains in your individual name and does not otherwise have a mechanism for passing outside probate, that asset may still need to go through probate when you die.

That is why funding and maintaining a trust are important parts of the overall estate-planning process.

Step 4: Continue Managing Your Property

Once the trust is established and properly funded, your day-to-day life may look surprisingly similar.

If you are serving as your own trustee, you generally continue managing the trust property.

For example, if your home is owned by your revocable living trust, you can generally continue living in the home, maintaining it, paying expenses, and making decisions about the property.

You can also generally buy and sell assets according to the terms of the trust.

The trust is not intended to make your everyday financial life unnecessarily complicated.

Instead, it creates a legal structure for ownership and management of the property.

Step 5: You Can Change the Trust

A revocable living trust is designed to be flexible.

While you are alive and have the legal capacity to do so, you can generally amend the trust if your circumstances or wishes change.

For example, you may want to:

• Change a beneficiary
• Add a beneficiary
• Change your successor trustee
• Change how a beneficiary will receive an inheritance
• Add newly acquired property to the trust
• Remove property from the trust
• Change other provisions of the trust

You may also be able to revoke the trust entirely.

This flexibility is one of the primary differences between a revocable trust and many irrevocable trusts.

Step 6: What Happens If You Become Incapacitated?

One of the important functions of a revocable living trust is planning for incapacity.

Suppose you are serving as your own trustee and become unable to manage your affairs.

Your trust can provide a mechanism for determining when a successor trustee should step in and begin managing the trust property.

The successor trustee can then manage the assets according to the instructions in the trust.

This can be particularly useful because the trust can provide a framework for managing property without requiring someone to start from scratch trying to determine what you would have wanted.

A revocable living trust is not a substitute for every incapacity-planning document, however. A comprehensive estate plan may also include documents such as a durable power of attorney and advance directive.

Step 7: What Happens When You Die?

When you die, you can no longer serve as trustee.

Your successor trustee then takes over the administration of the trust.

The successor trustee's responsibilities may include:

1. Identifying and securing trust property
2. Reviewing the trust agreement
3. Determining the beneficiaries
4. Paying appropriate expenses and obligations
5. Communicating with beneficiaries
6. Managing or selling property when appropriate
7. Distributing property according to the trust's instructions

The exact responsibilities depend on the terms of the trust and the circumstances of the estate.

Does the Trust Avoid Probate?

One of the primary reasons people create revocable living trusts is to avoid probate for assets that are properly owned by the trust.

When you die, the successor trustee generally administers trust-owned property according to the trust agreement rather than transferring that property through a probate proceeding.

However, a trust does not automatically eliminate probate from an estate.

If you own assets outside the trust, those assets may still require probate unless they pass through another mechanism, such as a beneficiary designation, joint ownership, or another form of nonprobate transfer.

This is why proper funding and coordination of your estate plan matter.

What Happens to Your House?

For many Oklahoma families, the home is one of the most important assets in the estate.

If your home is properly transferred into your revocable living trust, the successor trustee can generally manage the property after your death according to the trust's instructions.

Depending on the terms of the trust, the trustee might:

• Allow a beneficiary to continue living in the home
• Sell the home and distribute the proceeds
• Transfer the home to a beneficiary
• Hold the home in trust for a period of time

Your trust can provide instructions for how you want the property handled.

What Happens to Bank and Investment Accounts?

Financial accounts require careful attention when creating and funding a trust.

Some accounts may be retitled in the name of the trust.

Other accounts—particularly retirement accounts—have special rules and are generally not simply retitled to a revocable living trust.

Instead, beneficiary designations may need to be coordinated with the trust and the rest of your estate plan.

This is one reason it is important to look at your estate as a whole rather than treating the trust as an isolated document.

Does a Revocable Living Trust Protect You From Creditors?

Generally, a revocable living trust is not designed to protect the person who created it from creditors.

Because you retain control over the trust property, creating a revocable trust generally does not place those assets beyond the reach of your creditors.

If asset protection is one of your primary goals, you may need to consider other planning strategies.

The type of trust and the timing of the planning can make a significant difference.

Is a Revocable Living Trust Part of Tax Planning?

A revocable living trust is generally not created primarily to reduce your income taxes.

Because you retain control over the trust property, the trust is generally treated differently from an irrevocable trust for tax purposes.

That does not mean trusts can never play a role in tax planning. More sophisticated estate plans may involve different types of trusts and other strategies depending on the size and nature of the estate.

For many families, however, the primary reasons for a revocable living trust are management, incapacity planning, probate avoidance, privacy, and control over the distribution of assets.

What Happens If You Forget to Put Something in the Trust?

This is one of the reasons a trust-based estate plan generally includes a will.

A pour-over will can provide a backup mechanism for certain assets that were not transferred to the trust during your lifetime.

However, a pour-over will does not necessarily mean that an asset automatically avoids probate.

If an asset remains individually owned at death, the will may need to be admitted to probate before the asset can be transferred according to the estate plan.

The best approach is generally to properly fund the trust and periodically review your assets to make sure your plan remains coordinated.

How Is a Revocable Living Trust Different From a Will?

A will and a revocable living trust can both be important parts of an estate plan, but they work differently.

A will generally becomes effective at death and directs the distribution of property that passes under the will.

A revocable living trust can operate during your lifetime and can continue after your death.

A trust can also provide a mechanism for managing trust property if you become incapacitated.

For many people, the two documents work together rather than serving as alternatives.

How Is a Revocable Trust Different From an Irrevocable Trust?

The most important distinction is flexibility.

A revocable living trust can generally be amended or revoked by the person who created it while that person has the legal capacity to do so.

An irrevocable trust generally involves greater restrictions on the creator's ability to change or revoke the trust.

Irrevocable trusts can serve different purposes, including certain asset-protection, Medicaid-planning, and tax-planning strategies.

Whether an irrevocable trust is appropriate depends heavily on the circumstances and goals involved.

How Long Does a Revocable Living Trust Last?

A revocable living trust can continue after the person who created it dies.

At that point, the trust may become irrevocable, depending on its terms.

The successor trustee then follows the instructions contained in the trust.

Some trusts distribute all assets relatively quickly. Others continue for years or even decades.

For example, a trust might continue for a beneficiary who is:

• A minor
• Young and receiving a protected inheritance
• Receiving government benefits
• Unable to manage financial assets independently

The trust can establish the rules for how and when the assets are distributed.

Does Everyone Need a Revocable Living Trust?

No.

Whether a revocable living trust makes sense depends on your circumstances.

A trust may be particularly useful for someone who:

• Owns real estate
• Wants to avoid probate for trust-owned assets
• Has minor children
• Has a blended family
• Wants to control how beneficiaries receive an inheritance
• Owns property in multiple states
• Wants a plan for managing assets during incapacity
• Values privacy
• Has a more complicated estate

For other families, a will-based estate plan may be sufficient.

The goal is not to create the most complicated estate plan possible. The goal is to create an estate plan that accomplishes what you want it to accomplish.

How Do You Set Up a Revocable Living Trust in Oklahoma?

Creating a trust involves more than signing a document.

A typical process may include:

1. Identify your goals.
Determine what you want to happen to your property during your lifetime, during incapacity, and after your death.

2. Review your assets.
Your attorney can help determine what you own and how each asset is currently titled.

3. Choose your beneficiaries.
Determine who should receive your property and under what circumstances.

4. Select your trustees.
Choose who will manage the trust during your lifetime and who should take over if you cannot.

5. Prepare the trust and related documents.
Your estate plan may include a trust, will, powers of attorney, advance directives, and other documents.

6. Fund the trust.
Complete the appropriate transfers and retitling of assets.

7. Review the plan periodically.
Your estate plan should be updated when your family, assets, or goals change.

Keeping Your Trust Up to Date

Creating a trust is not necessarily a one-time event.

You should consider reviewing your estate plan after significant changes such as:

• Marriage or divorce
• Birth or adoption of a child
• Death of a beneficiary or trustee
• Acquisition or sale of significant property
• Moving to another state
• Changes in your financial circumstances
• Changes in your wishes
• Changes in applicable law

You should also periodically review beneficiary designations and the ownership of your assets to make sure they remain consistent with your overall plan.

Talk With a Tulsa Trust Attorney

A revocable living trust can provide a flexible framework for managing your property during your lifetime, planning for incapacity, and transferring assets after your death.

But the trust itself is only one part of the plan.

The way your assets are titled, your beneficiary designations, your will, and your other estate-planning documents all need to work together.

If you are considering a revocable living trust in Oklahoma, Morris Ratcliff Law can help you evaluate whether a trust makes sense for your family and, if so, design a plan around your goals.

Call a Tulsa Trust Attorney today!