A revocable living trust is a legal document that holds your assets during your lifetime and transfers them to your beneficiaries after death without going through probate. Unlike a will, a trust avoids the 6-12 month probate process and $4,000-$10,000 in court costs. A revocable trust can be changed or cancelled at any time during your life.
Why do you need a revocable trust?
The best (and shortest) answer I can give to anyone who asks why they need a trust: because a trust doesn't die! With or without a will, if you are the sole owner of an asset upon your death and there's no beneficiary already linked to it, then the court has a method to oversee who is entitled to it. That's the primary purpose of probate court. However, if that same asset is owned by a trust, then the trust dictates who receives the property, how, and when, without any court intervention or involvement.
How does a revocable trust work?
A helpful concept is to think of a trust as a bucket. During your life you place all of your assets into the bucket by retitling them in the name of the trust. As trustee, you hold the bucket handle maintaining control over the assets, but now those assets are simply gathered together in one spot, just as they were under your own name.
Upon your death or incapacitation, the person or people you chose in advance will take over control of the assets in the bucket. They are the successor trustees. They will follow the instructions you left with the bucket. Neither the use nor the taxation of the assets are affected, but the result is that when you die, your heirs don't need to go to court to ask a judge to release property to them. The assets are already gathered and ready to be distributed based on the conditions and timetable you planned out.
What are the benefits of a revocable trust?
The merits of this most crucial of estate planning tools are significant and numerous:
- Avoid probate — Probate court opens up your estate for public inspection and adds significant delays to the distribution of your property. You can avoid subjecting your heirs to this tedious and costly process by titling your assets in the name of your revocable trust.
- Minimize estate taxes — One of the most valuable characteristics of a trust is the ability to use both spouse's estate tax exemption, effectively doubling the amount of assets that can pass to heirs without being subject to the estate tax.
- Control your heir's inheritance — Your trust can be drafted so that it divides into separate shares for each inheritor, held in trust by your trustee. This allows you to require certain conditions, such as obtaining a degree or meeting age thresholds before receiving trust funds.
- Plan for incapacity — A trustee acting under the trust for an account owned by the trust is far more reliable than a power of attorney, which financial institutions often refuse to honor.
- Easy to change or cancel — A revocable trust can be easily amended at any time or cancelled altogether during your life.
Can a revocable trust be changed?
Yes. A revocable trust is just that — revocable. During your life, it can be easily amended at any time or cancelled altogether. That means a distribution pattern that you felt comfortable with five years ago can be amended based on changed conditions. The same applies for changing your successor trustee.
The list of benefits goes on. Contact us for a free consultation. We'll review your goals and discuss how estate planning helps achieve them. You'll receive a price quote on the spot or via an emailed engagement letter, giving you time to think through the consultation to decide if you're ready to move forward. Turnaround time is usually about a week and no payment is required until you sign your documents.