Some advice from your oldest daughter on incapacity planning …you must understand your revocable trust.
For many individuals seeking comprehensive estate planning, a revocable living trust is one of the more powerful tools available to you to protect against the needless cost and time imposed by the probate process. However, while you might understand that revocable living trusts give you the ability to reduce or eliminate the necessity of probate, you might not realize that a revocable living trust also affords some significant incapacity or disability planning protections. Here’s what you should understand:
Trust Management and Incapacity
After you create your revocable living trust, you take some of your property and transfer it into the trust’s name. As long as you carry out this transfer (known as funding) properly, the trust-owned property will avoid probate because the trust will be its legal owner. Therefore, probate is unnecessary because, even though you might be dead, the trust can continue to own and manage the property in accordance with the terms you established.
However, what happens to that property if you become incapacitated? The person who creates a revocable living trust, you, called the trustor or the grantor, is also the person who typically manages the trust as well. As the trust manager, called the trustee, you have the duty to make sure the trust’s property is cared for. So, when you become incapacitated or disabled, the trust needs another trustee to step in to take over management responsibilities. Fortunately, you, as the trustor, get to choose who that person will be in the trust.
The successor trustee is the person who steps in to manage the trust property after the original trustee becomes incapacitated or dies. In the event of your incapacitation, the successor trustee can begin managing the trust property immediately. There is usually no need for any court involvement, like there would be if you owned the property as an individual. Instead, the successor trustee can step in and take over the trustee’s duties at any time. Should the original trustee (you) regain your ability to make choices, the successor trustee will simply step aside and allow the original trustee to take over management responsibilities.
What about Property held outside the trust? Good question!
Of course, relying on a successor trustee to take over management of the trust is not going to help address all the incapacity planning issues you might face. For example, if you have any property that is not in the trust’s name, you will need another person to manage that property upon your incapacitation. You’ll also need to address important medical and health care choices with your plan, something that appointing a successor trustee will not allow you to do.
In other words, you still need a complete incapacity plan even if you plan on using your revocable living trust as a protection against incapacity or disability.