TABLE OF CONTENTS
- What is a 'Revocable Living Trust' in Minnesota?
- What is a 'Revocable Living Trust' in Minnesota - generally?
- 'Living' vs 'Testamentary' Trusts
- Revocable vs Irrevocable Trusts
- Revocable Living Trust
- What is a 'Grantor'?
- What is a 'Trustee'?
- Will I lose control of the assets and property I transfer into my Revocable Living Trust?
- Can beneficiaries change or terminate my Revocable Living Trust after I pass away?
- Does the Grantor need to notify the beneficiaries named in their Revocable Living Trust?
- Can a Revocable Living Trust ever become 'Irrevocable'?
- So, What is a 'Revocable Living Trust' in Minnesota?
What is a 'Revocable Living Trust' in Minnesota?
Unfortunately, a direct black and white answer to “What is a 'Revocable Living Trust' in Minnesota?” cannot be as straightforward as most would like.
This is because even though in 2016 Minnesota enacted its own version of the Uniform Trust Code, the term 'Revocable Living Trust' still does not have a specific uniform definition in Minnesota.
This is because a Revocable Living Trust doesn't just do the same one or two things every time in every trust.
Rather, the power of a Revocable Living Trust is in its flexibility. It can be customized to have many different benefits and/or functions depending on the needs of its creator/Grantor.
Therefore, one needs to use generally accepted descriptions of 'Revocable Living Trust' components in order to define what a 'Revocable Living Trust' is.
What is a 'Revocable Living Trust' in Minnesota - generally?
Generally, a ‘Revocable Living Trust’ in Minnesota could be defined as: a Trust created by the Grantor, during the Grantor’s lifetime, which takes effect immediately and can be modified or revoked, for any reason and at any time, by the Grantor during the remainder of their lifetime – as long as he/she has the mental capacity to do so.
REMEMBER: there is not a uniform legal definition of a 'Revocable Living Trust'. The definition provided was attained by combining generally accepted definitions of 'Revocable Living Trust' components.
'Living' vs 'Testamentary' Trusts
Generally, 'Living' Trust means a Trust established during the Grantor’s lifetime – it takes effect immediately.
Contrast with a 'Testamentary' Trust which is created through language in a Last Will & Testament – which only takes effect after the Grantor’s death.
Revocable vs Irrevocable Trusts
A Living Trust can be revocable OR irrevocable – because, technically, as stated above ANY Trust created during the Grantor’s lifetime qualifies it as a ‘Living’ Trust.
However, this article isn’t about covering all the “technically,…” examples of what could meet the description of a “Living Trust” – because believe me, there are many.
When speaking of a Living Trust what is typically referred to is the increasingly popular Revocable Living Trust used to distribute estate assets while avoiding probate.
‘Revocable’ means that the Trust can be modified or terminated (“revoked”), at will, by the Grantor anytime during their lifetime (as long as they have the mental capacity to do so).
The main purpose of a Revocable Trust is to allow the Grantor’s estate to avoid probate. The probate process can waste considerable time and money for even the most modest estate (and a modest estate may not have the money to waste).
The second most popular benefit of a Revocable Trust is it's full changeability/revocability at-will by the Grantor. You are NOT locked into any of the terms of your Revocable Trust. You are free to change or cancel ANY part of it at ANY time during your lifetime (as long as you are competent to do so).
There are many other benefits to using a Revocable Trust, but probate avoidance and change/revokeability are usually at the top of the list. (see Top 14 Benefits of Trusts You NEED to Know in 2019!)
‘Irrevocable,’ on the other hand, means that the Trust CANNOT be modified or terminated, at will, by the Grantor.
While still used to avoid probate, an Irrevocable Trust typically has some other specific purpose – such as reducing/avoiding estate taxes or reducing the size of the Grantor’s (or a beneficiary’s) estate so they can meet asset/income eligibility limits for government assistance benefits such as Social Security or Medicaid.
Popular examples of specific purpose Irrevocable Trusts are the Special Needs Trust and the Medicaid Asset Protection Trust.
Revocable Living Trust
So you can see that even though there is not one specific legal definition of 'Revocable Living Trust,' we can still come to a reasonable understanding by looking at its components.
But, now that you have a better understanding of what a Revocable Living Trust is, I'm sure you are also starting to see that trying to fully answer “What is a Revocable Living Trust?” isn't exactly clear and can quickly digress into many confusing subtopics.
HOWEVER, as I believe the vast majority of Minnesotans are reading this article for a specific reason: to gain a better understanding of the popular and powerful ‘Revocable Living Trust’, this article will focus exclusively on meeting that goal.
And since I believe you can do better than just a general understanding, I think you can handle some more specific Revocable Living Trust basics to move your understanding up a few levels. Please read on.
Revocable Living Trust FAQ
What is a ‘Grantor’?
A Grantor is the person who creates/establishes the Trust. The Grantor is also the initial Trustee of the Trust.
If a couple creates a joint Revocable Living Trust, they each are a Grantor. They can choose for one of them to be the initial Trustee or can decide to be co-Trustees together.
SIDE-NOTE: though it is acceptable to create a joint Revocable Living Trust, it is highly recommended that each spouse create their own individual Revocable Living Trust. Because if not drafted to specifically address certain issues, a joint Revocable Living Trust may allow a surviving spouse to make material changes to the Trust that the first-to-pass spouse never intended, wanted or would have approved of.
What is a 'Trustee'?
A Trustee is the person who manages the property placed into a Trust.
When a Revocable Living Trust is established, the Grantor is usually the Initial Trustee - maintaining full control over the Trust assets.
Will I lose control of the assets and property I transfer into my Revocable Living Trust?
No. Because you, as the Grantor, will also be the Initial Trustee of the Revocable Living Trust.
The Initial Trustee retains complete control over all assets transferred into the Trust. The Initial Trustee can add, remove and use everything in the Trust.
Therefore, with a Revocable Living Trust, because the Initial Trustee and Grantor are the same person, there will be no loss of control over the assets.
In fact, most will see no significant difference in their daily lives as a result of creating a Revocable Living Trust.
Can beneficiaries change or terminate my Revocable Living Trust after I pass away?
No. Your beneficiaries will have no authority to make any changes to your Trust after you pass away.
Allowing beneficiaries to make changes to the Trust would defeat the main purposes of the Trust. All final decision-making authority relating to the management of your Trust will be vested in your Successor Trustee.
This is because though your Trust is ‘revocable’ during your lifetime, it becomes ‘irrevocable’ upon your death – or becoming incapacitated or incompetent. Once your Living Trust becomes irrevocable, no one has the authority to change or terminate it.
Furthermore, your beneficiaries have no rights related to your Revocable Living Trust while you are alive. After you pass away, they only have the right to receive property per the terms you specific in the Trust documents.
Does the Grantor need to notify the beneficiaries named in their Revocable Living Trust?
No. In Minnesota, while the Grantor is alive they do not have to notify anyone that they may receive property from a Revocable Living Trust (after all, the Grantor free to change property and beneficiaries – or out-right cancel – the Trust any time they wish, for any reason).
It is only after the Grantor passes away, that the Successor Trustee has a duty to notify the beneficiaries. If you wish, you can also create a duty within your Trust for the Successor Trustee to notify beneficiaries upon your incapacity.
Can a Revocable Living Trust ever become ‘Irrevocable’?
Yes. There two(2) circumstances that will make a Revocable Living Trust irrevocable (aka unchangeable):
Circumstance #1: Upon the Grantor’s death.
- Pretty straightforward. A person can’t modify or terminate their Trust after they have already passed away.
Circumstance #2: Upon a finding of the Grantor’s ‘incapacity.’
- ‘Incapacity’ needs to be carefully defined within the Revocable Living Trust documents. For example: “Incapacity shall be evidenced by written certification of two(2) physicians that the individual is unable to effectively manage his or her own property or financial affairs...”
- Incapacity typically comes as a result of serious medical condition, such as stroke, dementia, Alheimer’s, etc. However, the specific situations will be carefully defined within any Trust documents prepared by the Maki Law Firm. Careful definitions are critical for ensuring a Grantor’s assets are fully protected – from themselves, while also preventing any arbitrary attempts by others to find them incapacitated in order to gain control of their assets.
- NOTE: a finding of ‘incapacity’ is NOT always permanent! The Grantor can have a temporary medical condition that later resolves, allowing the finding of incapacity to be removed – restoring the Grantor’s full control of the Trust assets and again allowing them to modify or revoke their Living Trust. It is only during the time of their incapacity that the Trust would be irrevocable.
Therefore, as long as the Grantor is alive and aware, their Living Trust will remain changeable and revocable by them – at any time and for whatever reason they choose.
It is only after the Grantor passes away, or is found no longer able to make decisions for themselves (either temporary or permanently), that the terms within their Living Trust become irrevocable (also either temporary or permanently).
So, What is a 'Revocable Living Trust' in Minnesota?
A Minnesota Revocable Living Trust is a probate avoidance tool that can be changed or cancelled by the Grantor at ANY time for ANY reason (as long as they are competent to do so).
It will save your estate time and money by allowing unmatched flexibility and control over the direction of your assets after your passing - WITHOUT interference by the courts.
I understand that this can be a confusing subject. But if you stuck with this article to the end, you should now have a better understanding of this powerful Estate Planning tool.
If you still have questions about Revocable Trusts or more Minnesota Estate Planning tools, please check out my other articles on this website.
And for further assistance, feel free to Contact Me using the form on this site, or give me a call for a free consultation!
Lastly, if you are still unsure about whether a using a Trust is right for your situation, be SURE to read my article 'Top 14 Benefits of Trusts You NEED to Know in 2020!'
PLEASE NOTE: I applaud your seeking out of Estate Planning information, but this article is for informational purposes only and is not a substitute for actual consultation with a qualified attorney.
You should not act on anything you read here without first consulting myself or another Minnesota Estate Planning attorney. Small details in your unique situation can result in a drastically different outcome.