SHOULD I GET A REVOCABLE TRUST?
When you begin to consider estate planning, you may have come across the term “living trust” or “revocable trust” in your reading - terms which have no doubt raised even more questions in your mind. Why should you get a living trust? In fact, what is a living trust and who manages them? Should this be part of everyone’s estate plan - and, most importantly, should a revocable trust be part of my estate plan? These are all worthy questions that we’re happy to answer for you.
What is a revocable trust?
You may already know what a trust is, but we’ll try to discuss it in real English, avoiding the legalese. A trust exists when an individual gives property in one form or another to a second person (or entity) to hold and manage for the benefit of a certain designated person (or persons). The person giving ownership of the property in question to the trust is called the grantor, while the person handling the management of the trust is a trustee. The people who benefit from a trust are called beneficiaries.
A revocable trust, often referred to as a living trust, can be changed or revoked throughout the grantor’s lifetime, and may not even be funded upon its creation. Funding may occur at any designated time, or on the grantor’s death. Either way, the revocable trust can be funded by many different sources, from checking accounts to real estate to stocks and bonds. The grantor can also be the trustee for their own revocable trust, and they retain the benefits of any property funding the living trust for the rest of their lives.
As with any trust, you should discuss its creation, funding, and control extensively with your attorney before undertaking to create one. That way, you can ensure that you’re doing the best thing for your estate, your beneficiaries, and your property.
How does a revocable trust work?
When you decide to create a revocable trust, your attorney will assist you in drafting a declaration of trust outlining the terms of your trust. This trust agreement identifies the trustee(s) - which can be yourself, your spouse, someone else you trust or even a trust company - and the beneficiaries of the property funding the trust. Your declaration of trust remains a living document until your death to accommodate changes you may wish to make at any time. A living trust can even be part of your incapacity planning, ensuring someone you trust is handling your property and seeing to the funding of your care should you be unable to do so for yourself.
Upon your death, your revocable trust will be executed in accordance with your wishes by your trustee. Any property that you have in the trust will be distributed to your beneficiaries, bypassing any lengthy probate processes, and ensuring the privacy of your estate details while simultaneously protecting the privacy of your heirs. Depending how you structure your living trust, you may also be able to defer estate taxes and guarantee that your heirs receive more of your estate in the long run.
Why should I get a revocable trust?
While a revocable trust may not be necessary or right for every estate plan, there are some serious benefits to consider when estate planning. From protecting the privacy of your family to ensuring they don’t have to go through a lengthy and expensive probate process, assess the benefits of a revocable trust with your attorney.
You ensure the privacy of yourself and your heirs. With or without a will, when you die without a revocable trust, your loved ones will be subjected to a process known as probate. During this process, details of your will and assets will be made public when they are filed with the probate court. On the other hand, your revocable trust is a private document that would not be subject to probate - along with all property you have given the trust.
Your trustee retains greater control over your estate. During the execution of a will, your executor is required to file multiple documents with the probate court - perhaps even detailed reports. When your estate is instead being handled by your trustee, they can act with independence and at their discretion beyond providing financial reports to named beneficiaries.
In the long term, a revocable trust may cost less than merely having a will. While it is true that establishing a trust has some cost, it may cost your estate less when you factor in the complications of probate court. Probate can take years, with court and associated costs adding up. Don’t just assume a will is cheaper when all is said and done.
When you have a revocable trust, your estate is distributed to your heirs more quickly. As we mentioned above, probate court can be a very lengthy process which can be both financially and emotionally difficult for your beneficiaries. Setting the terms of your estate plan within a revocable trust allows your trustee to begin divvying up your estate according to your wishes right away.
You should have a good grasp on what a revocable trust is now, along with the benefits of setting one up for your estate. Ready to take the next step in estate planning? Contact my office today at 216-600-0124.