The use of revocable living trusts can provide individuals and their families a variety of benefits. Mississippi has embraced the use of these trusts for estate planning purposes. While the laws can be quite specific, they also leave room for great flexibility. Understanding available estate planning resources and the basics of how they function is the first step in reaching both short-term and long-range objectives.
What are revocable living trusts and why are they used?
A trust is an arrangement in which a person, called the settlor, transfers his money or property to a trustee, who then holds the trust for the benefit of the beneficiaries. A revocable inter vivos trust, also called a revocable living trust is an integral part to many estate plans. It can serve as an instrument to dispose of the settlor’s assets upon death and also allows the settlor to enjoy the trust assets during his or her lifetime. The settlor may also serve as the trustee during their lifetime and has the right to revoke or amend the trust during his or her lifetime.
One of the main benefits of a revocable living trust is the avoidance of probate. The disposition of a person’s assets by will alone or without a will at death are generally subject to the Mississippi probate process, and property owned outside of Mississippi must go through the probate process of the state where the property is located. On the other hand, a person’s assets that are held within revocable living trust, including property owned outside Mississippi, are generally not subject to probate proceedings.
Avoiding probate provides a number of benefits. Probate can cost thousands of dollars and the assets may be tied up in the process for an extended period of time. A revocable living trust provides for administration of the settlor’s assets according to the settlor’s directions and may provide the beneficiaries with efficient accessibility to the trust assets upon the testator’s death. Also, if privacy is a concern, the terms of a revocable living trust will not typically be publicly disclosed.
A revocable living trust is also used to provide for the settlor during disability or incapacity without the need for a power of attorney designation or a court incapacity proceeding. It can specify the methods of distribution at death, or it can direct that the assets continued to be held in trust after the settlor’s death. For instance, a grantor may desire the trust to continue until beneficiary children reach a certain age, or the grantor may desire distributions to be made in stages rather that all at once. The use of a revocable living trust can therefore allow for flexibility, it can significantly reduce cost and uncertainty, and it can provide for trusts’ management without interruption after incapacity or death.
Does a revocable living trust avoid estate tax?
A revocable trust generally allows the grantor to continue to retain control over the trust assets during his lifetime. For this reason, a revocable living trust neither attracts nor saves taxes. However, estate taxation is not a concern for the vast majority of people because the payment of death and inheritance taxes are only required for very large estates. If the value of assets transferred during one’s lifetime or at death is under the federal government’s unified tax credit limit, which is currently $5.43 million, no payment of estate tax will be due. People with very large estates may need to consider other options such as irrevocable trusts to meet their tax planning objectives.
How does someone set up a revocable living trust in Mississippi?
A revocable trust is created under written agreement, often called declaration of trust, which transfers assets to the trustee. It is important to note that the trust is effective only if it is funded. Funding the trust is accomplished by retitling assets in the settlor’s name as trustee. While this can be a simple process for some assets, the only way to change title to real property such as houses and land in Mississippi is by recording a deed of transfer in the office of the County Recorder where the property is located. It is important to consult with a lawyer to ensure deeds meet the specific requirements of the county.