Revocable trusts are probably the best estate planning tools. They are far more effective than last wills or testaments for a variety of reasons. Revocable trusts are amazingly powerful legal tools and they are very effective if you want to avoid the probate process.
Revocable trusts allow the grantor (the creator of the trust) a great way to distribute the assets after their death. The trust also guarantees utmost privacy for the grantor and the beneficiaries. Let’s take a closer look and see how a revocable living trust lawyer can help you create the best revocable trust:
The revocable trust – a definition
As the name implies, a revocable trust can be changed during the grantor’s life. It can even be revoked, if the grantor decides that this is the best option. The revocable trust is created by the grantor, the settlor, or the trustor. In most cases, the revocable trust will have the same person as the grantor, trustee or beneficiary. This makes it an ideal tool to protect your assets and avoid the probate process. Talk to your living trust lawyer if you want more information about revocable trusts.
What does a revocable trust do? What can it be used for?
The trusts guarantees privacy
The lack of privacy is one of the major disadvantages of going through the probate process. Because the whole procedure is public, sensitive personal information will be made public – virtually anyone can find out intimate details about your assets. This is particularly problematic for affluent or famous clients, who often cherish their privacy. On the other hand, a revocable trust is the best way to ensure privacy during the process of distributing the assets. The privacy of both the grantor and the beneficiaries are protected. There are no risks when it comes to privacy.
The trust adheres to the wishes of the grantor
Just like a will, a revocable trust will guarantee the rightful distribution of assets to the heirs. The trust can be changed, altered or adapted an unlimited number of times, so you can manage the distribution of assets as you see fit. The grantor can change the provisions of the trust as often as he or she wants. After the death of the grantor, a trustee (according to the agreement) will manage the transfer of the assets to the beneficiary.
Creditor protection for beneficiaries
Revocable trusts don’t provide much protection for grantors against creditors. However, protection is very good for beneficiaries, making it a great financial tool to transfer properties to heirs. Keep in mind that the assets are protected against creditors only as long as they are part of the trust.
Possible tax reductions
Well written revocable trusts can help you avoid additional taxes for your assets. The estate taxes can be reduced a lot (only for the beneficiaries), but you will need to talk with your living trust lawyer to get more information about this aspect. The laws vary depending on your state, so you should get expert legal help.
The revocable trust – what doesn’t it do?
Revocable trusts also have some disadvantages. Here are some of them:
There are no tax benefits
There’s a common misconception that revocable trusts are used by wealthy clients in an effort to avoid paying taxes. Some people may even think that revocable trusts only exist to help people avoid taxes. This is not true. The tax benefits of revocable trusts are minimal, and apply only to beneficiaries. The grantor doesn’t receive any tax benefit during his or her lifetime. The state considers the assets held in a revocable trust the same as the assets held in the individual’s name. If you are still unsure about this important aspect, talk to your revocable living trust lawyer to get more information.
The trust doesn’t fund itself
Contrary to popular belief, a revocable trust cannot fund itself. It cannot receive money by merely existing. Creating the documents is not enough. New accounts must be registered in order to make it financially active, and it must be continuously funded by the grantor. In many cases, the revocable living trust lawyer will advise clients to have a “pour over” will. After the grantor’s death, it will transfer and collect all additional assets that were not part of the trust. This helps clients avoid the probate process. Simply put, the revocable trust gets all the individual’s assets, after his or her death.
The trust doesn’t eliminate the federal estate tax exemption
This is a shock to many potential clients. No, the trust doesn’t have a magical effect on the federal estate tax exemption. Moving your assets into the revocable trust doesn’t mean that they will be considered gifts. Also, this doesn’t affect the individual’s lifetime gift or estate tax exemption. Currently, this limit is set at $11,180,000 per person.
Is a revocable trust the right choice for you?
Privacy and avoiding the probate process – these are the main reasons why a person should create and use a revocable trust. If these are your main concerns, yes, a revocable trust is the perfect choice. If you want to go forward with a revocable trust, contact a living trust lawyer and start the procedures. Here are additional reasons to consider a revocable trust:
- you have assets in more than one state – if you have assets in multiple states and you don’t have a revocable trust, your assets will go to separate probates in each state; this can quickly turn into a nightmare; if this is the case, get a revocable trust as soon as possible
- you have complex assets and investments – if your estate is large and complex, a revocable trust can help your beneficiaries avoid legal and financial issues that can occur after you pass away
you want to plan for your health – the assets that are part of a revocable trust can be managed by a disability trustee, in case the grantor becomes incapacitated