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.
How to Create a Living Trust in Rhode Island
Creating a trust is pretty similar in every state but you must take into account the specific process and additional rules that your state may have. If you’d like to start a living trust in the state of Rhode Island, here’s what you’ll need to do:
- Decide on a single or joint trust: For anyone who’s unmarried, a single living trust obviously makes the most sense. On the other hand, a joint trust lets married couples combine their individual and joint assets in a single place.
- Take stock of your assets and property: You can put whatever you want in your living trust, including real estate, cars, investment accounts and jewelry. Make sure you gather all the proper documentation (deeds, titles, etc.) that proves your right of ownership.
- Pick a trustee for your living trust: Many people choose a relative or a close friend as their trustee, and others choose themselves. Note that if you are the trustee of your living trust, you’ll also need to designate a successor trustee to take over when you die.
- Create the living trust document: You can do this on your own (likely with the help of an online trust-creation program) or through a lawyer who specializes in trusts.
- Sign your living trust in front of a notary public: The document will not be recognized if it is not witnessed by a notary public registered in the state of Rhode Island.
- Add your assets and property to your living trust: This step can be complex, so you should strongly consider working with an attorney.
What Is a Living Trust?
A living trust is a legal framework established 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 a 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 on 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 holds 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 in order to pass property on to your heirs. It should be noted, 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:
- Naming an executor
- Providing instructions on how to pay debts and taxes
- Establishing guardianship for children
- Naming managers for children’s property
The table below illustrates other differences between living trusts and wills:
Living Trusts vs. 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|
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.
The 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
- A financial advisor can be a valuable partner as you put together an estate plan as they can help you make sure you’ve done everything correctly and that your wishes will be met. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Saving for retirement is an important part of being able to effectively plan your estate. Try using SmartAsset’s free retirement calculator to make sure that you’re on your way to meeting your retirement goals.
Photo credit: ©iStock.com/Piotrekswat, ©iStock.com/diane39