A revocable trust provides several estate planning benefits.
Estate planning is necessary if you want to protect everyone you love and everything you have if you were to be legally incapacitated and when you eventually die.
While a revocable trust is not required, it can streamline the estate settlement and asset distribution.
Those who incorporate trusts into estate planning can avoid potentially lengthy and costly probate proceedings.
A revocable trust protects privacy around asset distribution.
A revocable trust is a legal arrangement that involves the creation of an entity.
The trustmaker (also known as a grantor, settlor, or trustor) places assets into the trust to be managed by a trustee.
With a revocable living trust, the trustmaker can serve as the trustee and change or terminate the trust during his or her lifetime.
With this flexibility, the trustmaker can make changes and continue to control the assets.
If the trustmaker has served as the primary trustee and becomes incapacitated or dies, then a successor trustee will assume management of the trust.
The terms of the trust outline who will serve as successor trustee and how the trust will be managed.
According to The American College of Trust and Estate Counsel, probate avoidance is an appealing aspect of trusts.
What is probate?
Generally speaking, probate is the legal process for validating a last will and testament and distributing the estate of a deceased individual.
Because it occurs in the court system, the process is public and can be expensive and protracted.
For these reasons, many people prefer to bypass probate.
When assets are placed into a revocable trust, they are not included in the estate of the trustmaker at the time of death.
This means the assets are not subject to probate proceedings.
Instead, the acting trustee manages and distributes assets according to the terms of the trust.
Although trust-based estate plans may be more costly to establish than will-based plans, they can save time, reduce expenses, and maintain privacy for beneficiaries.
While many mistakenly believe all trusts are protected from creditors, this is a dangerous misconception.
Because revocable trust assets are still owned and managed by a trustmaker while he or she is alive, they are not shielded from creditors.
What does this mean?
If the trustmaker has debts, trust assets are as accessible to creditors as in a personal bank account.
Effectively setting up a trust involves critical components.
Drafting the Trust Document.
Trustmakers should work with an experienced estate planning attorney to create a trust and outline the terms.
The terms of the trust should include a trustee managing the trust and beneficiaries inheriting assets.
Funding the Trust.
To fund a trust, the trustmaker must transfer asset ownership to the trust by directly titling assets into the trust name or to the trust at death via beneficiary designations.
This means a home should be retitled to the trust and bank accounts should be created in the name of the trust.
Only assets titled in the trust can avoid probate through the trust.
Choosing a Successor Trustee.
If the trustmaker chooses to serve as the trustee while he or she is alive, then a successor trustee must also be named.
This individual should be reliable, honest, and capable of managing the trust if you become incapacitated or die.
Regularly Review and Update the Trust.
Like all estate planning documents, a revocable trust should be reviewed regularly and updated as needed.
Doing so ensures your current wishes are reflected in the documents.
Is avoiding probate an important personal estate planning goal?
Schedule a consultation with Harvest Law KC to create a comprehensive estate plan that meets your needs and those of your family.
Assets held in a revocable trust are not subject to probate and can be passed privately to beneficiaries.
Unlike an irrevocable trust, a revocable trust provides flexibility for management, changes, or termination of a trust while the trustmaker is alive.
If the trustmaker becomes incapacitated, the successor trustee can seamlessly assume management of the trust and its assets.
Ultimately, revocable trusts simplify the management and distribution of assets.
This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.
Reference: The American College of Trust and Estate Counsel (ACTEC) (Apr 11, 2019) “How Does a Revocable Trust Avoid Probate?
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