A living trust is a viable estate planning tool for Rhode Island residents. Since they allow your families and loved ones to skip the time-consuming and expensive process of proving a will, creating one is a good idea for those with complicated estates. If you, in fact, decide that a living trust makes sense for you, it might be a good idea to talk it over with a financial advisor and an estate planning attorney. SmartAsset’s free matching tool can pair you with a local financial advisor based on your personal needs.
How to Create a Living Trust in Rhode Island
If you’d like to start a living trust in the state of Rhode Island, here’s what you’ll need to do:
A living trust is a legal framework established by through a physical document. You place property and assets within it to be distributed to your beneficiaries after you’ve died. You must also decide on a trustee who’ll be in charge of distributing the contents of your living trust based on your specifications. If you name yourself trustee, be sure to follow that with a successor trustee.
One option available to you is a revocable living trust, which is extremely flexible. You can remove items in it as you please, though you’ll still be taxed on that property and assets as though they’re still yours.
An irrevocable living trust allows for much less movement post-creation. You won’t be able to remove items from an irrevocable living trust without permission from everyone named in the document. As a result, this type of trust is taxed as a separate and distinct entity.How Much Does It Cost to Create a Living Trust in Rhode Island?
The cost of setting up a living trust in Rhode Island varies based on the method you go with. Online programs are common and typically cost $200 or less. However, there are significant risks to be mindful of when it comes to DIY estate planning. Seeking the help of a lawyer, while safer, could run you $1,000 or more.
Many lawyers specialize in estate planning. But if you’re setting up a living trust, you’ll want to consult someone who knows more than just standard estate planning. Try to find an attorney with a specific focus in trusts.Why Should You Get a Living Trust in Rhode Island?
There are a few reasons why creating a living trust can be worthwhile for Rhode Island residents. The primary benefit is that it allows your family to avoid probate, which is the process by which the contents of a will are meticulously proven. This can be a lengthy, complicated and public affair. While some states have sought to simplify the probate process by adopting what’s known as the Uniform Probate Code, Rhode Island is not one o of them. As such, the probate process here can get a bit convoluted, and it may pay to use a living trust instead.
Should you become incapacitated, having a living trust in place also means you won’t need to go through conservatorship. This is because your living trust will already dictate who your trustee or successor trustee is.
A living trust also makes it easy to leave property to a minor. Through a living trust, you can specify that the trustee hold on to certain assets until the minor reaches a predetermined age.Who Should Get a Living Trust in Rhode Island?
If you want to avoid probate or you have a particularly complex estate, a living trust is a solid option to consider. Note, though, that Rhode Island offers a simplified probate process for estates worth less than $10,000. For smaller, simpler estates, living trusts might be more trouble than they’re worth.Living Trusts vs. Wills
Just because you have a living trust doesn’t mean creating a will becomes obsolete. A will can handle the property and assets that you don’t place in your living trust. Wills can also perform unique tasks, such as:
The table below illustrates other differences between living trusts and wills:Living Trusts vs. Wills Situation Living Trusts Wills Names a property beneficiary Yes Yes Allows revisions to be made Depends on type Yes Avoids probate court Yes No Requires a notary Yes No Names guardians for children No Yes Names an executor No Yes Requires witnesses No Yes Living Trusts and Taxes in Rhode Island
Creating a living trust in Rhode Island is unlikely to affect your tax bill down the road. However, you should familiarize yourself with Rhode Island’s estate tax, which is levied on estates worth more than $1,537,656. The maximum estate tax rate is 16%. Rhode Island has no inheritance tax.
You should also be mindful of the federal estate tax. This tax only affects estates that are worth more than $11.4 million, or twice that for couples.Bottom Line
Creating a living trust is one of many methods for transferring assets to your heirs. Rhode Island residents with complex and valuable estates should consider this route, whereas anyone with a fairly straightforward or small estate can probably just use a will. That said, being able to skip the probate process may be enough of a draw even for smaller estates. If you decide to get a living trust, it’s recommended that you work with a lawyer to finalize your plans.Estate Planning Tips
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