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What You Should Know About a Revocable Trust


Submitted by Bay Point Wealth Management on October 28th, 2015

Estate planning is not a one size fits all approach. For some, using a Revocable Trust as the primary vehicle for the disposition of your estate is appropriate. The answer depends upon each individual’s circumstances. A Revocable Trust is a device used to manage property during a person’s lifetime and dispose of assets upon death. In contrast, a Will only disposes of assets held in one’s individual name upon death. There is no authority granted in a Will until the author of the Will (the Testator) dies.

Both a Will and a Revocable Trust may serve as the primary dispositive document of an estate plan. Moreover, each can be revoked, modified or terminated at any time. There are many similarities between the two documents. Both documents ensure that property passes to the individuals/institutions of your choice in the proper amounts and manner you desire. From a tax perspective, both a Will and a Revocable Trust can accomplish the same tax-savings objectives. However, a Revocable Trust can offer three primary advantages over a Will: (i) avoidance of probate; (ii) ease of managing assets during incapacity; and (iii) privacy.

Avoidance of Probate

The property placed in the Revocable Trust during life avoids probate administration at death. A Will, on the other hand, must be verified by the court before it can be enforced. This may be an important consideration because probate can be expensive and time consuming, often taking between nine months and two years to be formally completed. If you own real property in other states, your family could face multiple probates, each one according to the laws in the jurisdiction where the property is located.

Management of Assets During Incapacity

A Revocable Trust also provides for the administration of the trust property if the Grantor becomes incapacitated. Generally you will serve as your own Trustee for as long as you are willing and able to serve. A Revocable Trust provides a way to care for you should you become disabled by allowing the Successor Trustee to manage the trust property. A Will provides no protection if you become physically or mentally incapacitated.

Privacy

A Revocable Trust offers privacy compared to Probate, which is a public process. A Will, unlike a Revocable Trust, must be filed with the court. The Personal Representative must file reports with the Court both identifying and providing the value of assets held by the decedent. As a result, your financial affairs and the value of your estate become public information. In contrast, a Revocable Trust is not filed for public record with the court.

Conclusion

Revocable Trusts are not for everyone, but they can fit the needs and desires of certain people. Once you create a Revocable Trust, you may wish to change the legal ownership of your assets to your Revocable Trust in order to receive the full benefit of the Revocable Trust. Failure to do so could eliminate the advantages a trust offers. Keeping your designations current helps you ensure that your assets will pass in accordance with your intentions.