A revocable trust is a type of living trust (A living trust is set up during the donor’s lifetime) that can be amended or revoked by the donor during their life. This is distinguishable from testamentary trusts which are created under the donor’s Last Will and Testament and only effective upon the donor’s death, and irrevocable trusts which cannot be amended or revoked by the donor. While revocable trusts are not the ideal legal tool in some cases, they have many valuable uses. Revocable trusts provide the donor with a private, flexible tool to manage their assets not only during their lifetime but also to provide ease of administration of their estate upon their death.
Privacy
Revocable trusts are generally very private documents. Their contents stay between the donor, their trustee, and the beneficiaries of the trust. They do not require a court to accept their validity and nosy family members (in the absence of litigation) have no access to what you left other beneficiaries. This is sometimes an effective way of preventing family conflict.
Ease of Administration
As mentioned above, the court does not oversee the administration of a revocable trust. A common reason for the use of revocable trusts is that it can speed up the process of distributing the trust’s assets upon the death of the donor. Unlike a revocable trust, a Last Will and Testament must be submitted to the surrogate’s court, notice must be given to all interested parties and the court must issue Letters Testamentary to the executor before any distributions can be made to any beneficiaries. A revocable trust can speed up the process by which heirs receive their inheritance, can reduce legal fees, and can significantly diminish the administrative burden on the estate’s fiduciaries.
A huge advantage of the revocable trust is that all of the donor’s properties can be held inside the trust and if real property is held in more than one state, it can eliminate the need to appoint a fiduciary in each state and go through multiple state’s probate or administration process – which can again save both time, money, and administrative headaches. Further, the trust can hold multiple bank accounts with more than one financial institution all in one place. It creates a simple starting place for your trustee to work from.
Flexibility
One of the key characteristics of a revocable trust is its flexible nature. The donor does not need the consent of the trustee or the beneficiaries to amend or revoke the trust. This gives them the control to change the named trustee, to change the beneficiaries or even simply their proportionate shares.
Further, the flexibility of the trust gives the donor the ability to dictate the terms under which their beneficiaries inherit. They can leave the beneficiaries’ shares in further trust if they have concerns about a beneficiary’s lifestyle or their creditors and they can plan to provide their share in a supplemental needs trust if they are disabled or have reason to believe they will be receiving government benefits in the future. The donor can even withhold distributions until a beneficiary has reached a certain age or a certain milestone, or provide that the funds can only be used for a certain purpose such as to pay for a beneficiary’s education or primary residence.
The revocable trust provides the donor with this flexibility and control at the same time it allows for the ease of administration that a beneficiary designation on a bank account would.
The flexibility of the revocable trust benefits the donor as well. The trust gives the donor the ability to provide for the management of their assets in the event they become incapacitated through the appointment of a successor trustee. Further, since the donor’s assets are already marshaled in one place, the trust can be amended to become an irrevocable trust and the donor can engage in Medicaid asset protection planning in a streamlined fashion.
A revocable trust is only as powerful as you make it. If you place all your assets into the revocable trust you can potentially avoid probate in its entirety. If you fail to fund the trust at all, it is as good as useless. You can decide, in consultation with your estate planning attorney, which assets are appropriate to place into your revocable trust and which are not.
Call the Law Offices of Roman Aminov, P.C. at 347-766-2685 to determine if a revocable trust is right for you and how to effectively fund it.
