A revocable living trust usually makes sense in Alabama if you:
own real estate, especially in more than one state
have young children, a blended family or a beneficiary who needs protection
want to keep your family's affairs private
want someone you chose ready to manage your property if you cannot
If your estate is simpler and your accounts already name beneficiaries, a will may be all you need. A trust is not only for large estates: what you own and who will inherit it matter more than how much you have.
What is a living trust in Alabama?
A revocable living trust is a trust you set up during your life to hold your property and pass it to the people you choose. You usually serve as your own trustee, so you keep managing your money and property as you do now, and you can change or cancel the trust during your life (Ala. Code § 19-3B-602). You also name a successor trustee, who takes over if you become unable to manage your affairs, and at your death.
The trust controls property you validly put into it, and property paid to it at your death. That is why funding the trust matters as much as signing it. A living trust is also not a living will, which records your end-of-life medical wishes in an advance directive.
Revocable or irrevocable? With an irrevocable trust, you generally cannot take the assets back or change the terms alone. Whether you keep any benefit, such as income, depends on how the trust is written. More on how revocable and irrevocable trusts differ.
What a living trust adds to a will
It keeps funded property out of probate. A will passes property only through the probate court, and a full Alabama estate administration cannot close sooner than six months after the executor is appointed (how long probate takes and what probate costs in Alabama). Property in the trust passes under its terms instead.
It can spare your family a second probate. A lake house or land in another state may otherwise need its own probate there. Deeded to your trust, it can pass with the rest of the trust. More on avoiding ancillary probate.
It plans for incapacity. A will does nothing while you are alive. If you cannot manage your affairs, your successor trustee can manage trust property without a court-supervised conservatorship. A durable power of attorney covers property outside the trust, such as retirement accounts.
It manages what children and vulnerable beneficiaries receive. The trust can hold a share until the ages you choose, or keep it managed for someone who should not receive a lump sum. A will can create a testamentary trust for children, but it starts only after probate.
It can provide for a spouse and children from an earlier marriage. The trust can support your spouse for life and then pass what remains to your children (planning for blended families).
It keeps the details private. A probated will is recorded in the probate court's public records. A trust is generally not filed with any court.
It takes more work up front. A will is signed and stored. A trust is signed and then funded, as described below.
For a broader look at both documents, see Do I need a will or a trust in Alabama?
When a trust helps, and when a will may be enough
A couple with a Huntsville home and a lake house in another state. If both houses stay in their own names, the second spouse's death can mean one probate in Madison County and another where the lake house sits. With both houses deeded to their trust, their successor trustee can sell or distribute them without a probate in either state.
A single person who rents and has modest savings. If their bank and retirement accounts already name beneficiaries, those accounts usually pass to the people named without probate. A will, a durable power of attorney and an advance directive may cover the rest. Do I need a will in Alabama? explains what a will does on its own.
How to set up a living trust in Alabama
Decide what the trust should do. Who receives what and when, from your home to family heirlooms, and whether a child's share is paid outright or held in trust. This conversation with Sarah S. Shepard shapes everything else.
Choose your trustee and successor trustee. You usually serve as trustee yourself. Your successor can be a family member, a friend, or a bank or trust company (who can serve as trustee). Because our firm also guides successor trustees through trust administration, we draft with their job in mind.
Sarah prepares your documents. A trust-based estate plan usually includes the trust, a pour-over will, a durable power of attorney and an advance directive, plus the deed that moves your home into the trust.
Sign. You usually sign at our Huntsville office. We provide the witnesses and notary your documents require.
Fund the trust. Your home is deeded to you as trustee, and the deed is recorded in the probate office of the county where the home sits (Madison County for most Huntsville homes). We prepare and record deeds only as part of an estate plan, when your engagement includes that work. Property in another state may need a lawyer licensed there.
Bank and investment accounts are retitled to the trust. Retirement accounts and life insurance usually stay as they are, and we review who you have named (beneficiary designations and trusts). If a retirement account will pass to your trust, the trust should include terms written for the federal distribution rules, and if you are married, a 401(k) generally needs your spouse's written consent to name anyone else.
Keep it current. Title new property to the trust, and review the plan after a marriage, divorce, birth, death or move.
Questions about living trusts
How much does a living trust cost? We charge flat fees for estate planning, based on the documents and planning your family needs, and we agree on the fee before you engage the firm.
Can I be my own trustee? Yes, and that is the usual arrangement: you manage the trust property as you do now. Your successor trustee steps in if you cannot act, and at your death. See what a successor trustee does first.
Does a living trust avoid probate? For property the trust owns at your death, yes. Anything left in your name alone, with no named beneficiary, usually goes through probate under your will, so funding the trust is what makes it work. More on avoiding probate in Alabama.
Does a living trust protect my assets from creditors? No. While you are alive, your creditors can reach property in your revocable trust, and after your death it can be used for your debts, funeral costs and estate expenses if your probate estate falls short (§ 19-3B-505).
Do I still need a will? Yes. A trust plan includes a short pour-over will that sends anything left in your name alone, with no named beneficiary, to the trust (§ 43-8-140), though that property usually goes through probate first. Your will is also the usual place to name a guardian for your minor children if neither parent can raise them (naming a guardian in your will).
Talk with Sarah about a living trust
Schedule a consultation with Sarah S. Shepard, our estate planning attorney in Huntsville, to decide whether a will is enough or a living trust belongs in your plan. Sarah prepares the trust and the pour-over will, and we provide the witnesses and notary when you sign (living trust planning with Sarah). We work with families in Huntsville and North Alabama.
Sarah S. Shepard is an estate planning attorney at Sparkman, Shepard & Shepard, LLC in Huntsville, admitted to the Alabama State Bar in 2012. She prepares wills and trust-based estate plans for families in Huntsville and North Alabama. More about Sarah S. Shepard.