The main goal of estate planning is safeguarding your assets, both during your life and in preparation for your loved ones after you pass away. For many, a will is the best way to achieve this protection – it allows you to denote who receives what from the estate and reduces the confusion that can arise after the estate holder’s death.
However, a will is not your only option.
If you live in Ohio, you can also set up a revocable living trust. Similar to a will in terms of protecting your assets, a revocable living trust in Ohio offers some key benefits but also requires different steps to create. Here, we discuss those steps, as well as explain what establishing a living trust could mean for your estate.
What is a Revocable Living Trust?
To define a revocable trust, we must first explain what a living trust is and the function it serves in estate planning.
A living trust is a legal entity – not too dissimilar from a business or similar entity – that you create as a mechanism to hold ownership over your assets during your lifetime. As the trust’s creator, you are referred to as the “settlor” or “grantor,” with the latter being the more common term in Ohio. Those assigned to manage the trust are termed “trustees.” Crucially, the trust will also name “beneficiaries,” who are the people who will receive the assets placed into the trust upon your passing. Under Ohio law, a grantor can also serve as a trustee of their own trust – a law that proves vital when it comes to the revocable part of such a trust.
Upon your death, the trustees are responsible for ensuring the assets held within the trust are distributed according to the grantor’s wishes.
So, where does the “revocable” aspect come into play?
A revocable trust is one in which the assets placed into the trust can be returned to the grantor at any time. A revocable living trust offers flexibility because the terms of the trust can be changed at any time during the grantor’s life.
By contrast, an irrevocable living trust sees the grantor hand control of the trust’s assets to the trustee(s). That leaves the grantor with no legal right to the assets in the future, except for grantors who also make themselves trustees. Assuming you have chosen not to become a trustee, an irrevocable living trust can offer asset protection benefits and it is not subject to the same estate taxes as a revocable living trust.
Which of the two is the best choice for your situation is a question that is typically best answered by consulting with an estate planning attorney in Ohio. But for now, let us move on to the important business of setting up a revocable trust.
The Steps for Creating a Revocable Trust in Ohio
Let us assume you have opted for a revocable trust. There are now seven key steps to follow when establishing a living trust in Ohio, with the failure to follow any of these steps potentially leading to the trust being invalidated.
Step 1 – Choose Between an Individual or Shared Trust
This step comes down to a simple question – do you want to create a revocable trust for your individual assets or one that covers the assets you share with a spouse or partner?
In the latter case, a shared trust removes the issue of dividing property and assets between two people who own the assets together. The family home is a good example – the property’s title will likely include the names of both spouses. With an individual trust, you would need to record a deed with the state of Ohio that transfers a half interest in the property over to the other partner upon your passing. In essence, you eliminate a lot of paperwork and ensure your trustees only have to worry about dealing with a single transfer process that begins upon both grantors’ passings.
Of course, a shared trust is not an option for those who live on their own. But even for couples, you may choose an individual living trust if you or your partner held assets before entering the relationship, you have children from a prior relationship, or if you own no assets together.
Give this first step a lot of thought – it impacts not only how the trust is handled upon your death but also what your beneficiaries receive.
Step 2 – Choose the Assets to Include
This step can be a tough one, primarily because it is often difficult to determine which assets would benefit most from being in a living trust. The following is a short – though not comprehensive – list of the assets usually placed into these types of trusts:
- Residential properties and other forms of real estate (even properties that have active mortgages)
- Bank Accounts
- Life Insurance Policies
- Business Interests in an LLC or Corporation
- Any patents or copyrights you own
- Valuable collections, such as art, coins, , and similar objects that have high aftermarket values
- Bonds, stocks, security accounts, and similar investment vehicles
- This might include other small business interests, such as shares you own in a limited liability company.
- Precious metals and jewelry
Essentially, any asset you wish to pass on – while declaring who should receive the asset and how they receive it – can be placed into the trust. Consult with your estate planning attorney if you are uncertain about whether an asset is suitable. Additionally, remember that, as the grantor of a revocable trust, you can also remove or add assets to the trust at any time.
Step 3 – Designate Your Successor Trustee(s)
Next up – choose a successor trustee, along with any co-trustees, assigned to your trust.
According to Ohio Law, the successor trustee is responsible for filing affidavits with both the county auditor and the recorder of the county in which a property or asset is located when distributing the assets placed in your trust. This affidavit must name all trustees, their addresses, and references to any deeds or instruments that bestow the title of trustee to those people, such as your living trust. This affidavit may not be required if the original trust instrument or a memorandum of trust is already filed with the county recorder.
From there, the successor trustee – along with any co-trustees – ensures that the assets placed in the trust are distributed among beneficiaries accordingly. Thus, it is a position that comes with great responsibility, which you must keep in mind when making your choices.
Step 4 – Choose Your Beneficiaries
A beneficiary is anybody you designate to receive part or all of the assets placed into your revocable living trust in Ohio. Almost any person can be named a beneficiary, as can some organizations, such as charities or other trusts. Typically, those creating living trusts choose family members as beneficiaries, though this is not mandatory.
So, this step is simple – choose who will receive the assets entered into your revocable living trust. The challenge comes in determining how you will divide those assets, though that choice is still ultimately up to you as the grantor.
Step 5 – Create the Living Trust Document
There is no standardized form to complete when forming a revocable living trust in Ohio. Rather, it is up to you – likely with the aid of an attorney – to create the trust document yourself. The document should not only declare the type of trust you intend to create but also identify the assets, grantor, trustee, and beneficiaries of the trust. The grantor may also declare their marital status and whether they have children.
The grantor must be mentally competent to create the living trust in the first place. When that is not possible, you must have assigned somebody to have power of attorney over financial and legal matters on your behalf while you were still of sound mind.
Step 6 – Sign Your Revocable Living Trust Document
Your paperwork requirement isn’t done yet. It is wise to have a clearly written trust signed in the presence of two disinterested witnesses and a certified notary public.
Step 7 – Change the Titles on Relevant Trust Assets
In establishing a living trust, you essentially hand over the ownership of all assets placed into that vehicle to the trust. That needs to be reflected in the official titles of those assets. This process is called “funding” the trust. The title of any property or vehicle you owned that is now in the trust needs to be updated to demonstrate that the trust now owns that asset.
For real estate, this process typically requires the creation of a written deed or transfer on death affidavit – signed by you – that is passed to a “grantee.” In this case, the grantee will be the trust and its trustees. As for the deed itself, it must contain the names of both the grantor and grantee, as well as a description of the asset being transferred and language that specifies that the grantor is handing over the asset to the grantee.
Create Your Revocable Living Trust in Ohio with Attorney Christopher Diedling
You now know the basics of what goes into setting up a revocable trust in Ohio. Bear in mind that a living trust offers a way for your beneficiaries to avoid probate and for you to dictate how and when your beneficiaries are to receive their inheritance, making it an attractive vehicle, but it does not eliminate the need for a will. The will is still a necessary “back-up” plan in case you fail to put some of your assets into your Trust. A will is still useful for passing on assets that are not held in the living trust – and to ensure there is no confusion over who receives what from your estate.
There is just one more thing to do – contact the offices of Attorney Christopher Diedling to start the revocable living trust creation process. You can reach us by phone at (513) 672-6122 or via the contact form on our website.