Proper estate planning involves evaluating all the tools available at your disposal. Inevitably, you will need to consider how useful a revocable trust could be for your specific situation.
People have been using trusts to safeguard their assets for a long time. They are popular estate planning instruments that offer unique benefits.
In this article, we will discuss revocable trusts and how well they could fit into your overarching estate plan. We will also talk about relevant matters like setting up revocable trusts and changing them so you have a good idea of what to expect.
What Is a Revocable Trust?
Many of us know wills as the important documents that determine who gets what after someone passes away. A will is a commonly used estate planning and transfer instrument, but it is not your only option. You can also control how your estate becomes managed after your death by creating a revocable trust.
So, what is a revocable trust?
In essence, a revocable trust is a document you author during your lifetime that provides clear instructions regarding how you want your assets handled after you pass away. While you are still alive, you can transfer ownership of assets to a trust and keep them there until the time comes for them to go to your heirs.
The grantor is the person who creates the trust. They determine what assets will go into the trust and who will get them.
The trustee is the person in charge of executing the grantor’s wishes. According to the Legal Information Institute, the trustee should act in the best interests of the beneficiaries. Note that the trustee can also receive something from the trust, but some grantors try to avoid that to prevent a conflict of interest.
Finally, you have the beneficiaries. The beneficiaries are the parties that will eventually receive the assets from the trust.
Those are the fundamental elements of a trust. Also, the grantor can change the terms of a revocable trust at any time for any reason. That flexibility is important to many grantors, especially those setting up trusts while they are still relatively young.
Do You Need a Revocable Trust?
Now that we know what a revocable trust is, let’s revisit the question that prompted the creation of this article. Who needs a revocable trust?
Truthfully, any adult can benefit from having a revocable trust.
Do you have kids you want to support no matter what happens to you? By setting up a trust and reserving assets for your children there, you can provide a safety net for them. They can land on their feet even if something truly unfortunate happens.
Are you a business owner? If so, consider creating a trust that dictates how you want things managed if something bad happens to you. Even if you cannot operate your business anymore, you can rest assured that it will still benefit the people you care about.
Setting up a trust still makes sense even if you do not have any family members you want as heirs. In a scenario such as that, you can name your friends as the beneficiaries of your trust. You can even set up your trust so that ownership of your assets will become transferred to your favorite charity after you die.
Anyone who wants to maintain control over their estate should take a keen interest in creating a revocable trust. If that sounds like something you need, contact an estate planning attorney today and start working on that revocable trust.
What Are the Benefits Provided by Revocable Trusts?
The control that revocable trusts offer is definitely their main selling point. However, there are other reasons why you should be interested in creating a revocable trust.
Let’s talk about the additional benefits of setting up a revocable trust in this section of the article.
Revocable Trusts Are Not Subject to Probate
In New York State, a will that a deceased individual leaves behind must be subject to probate. For those unaware, probate is the process of determining a will’s legitimacy. The executor of the will must prove to the court that the will is valid before executing its instructions.
Probate is a necessary part of managing a deceased individual’s estate, and it is helpful to know that your loved one’s final wishes are being fulfilled. Even so, there are downsides inherent to the probate process.
Chief among those downsides is the length of probate. We are talking about a process here that could easily drag on for months. If you are the sole breadwinner for your family, you cannot have them wait that long to receive the assets from your estate. Setting up a trust will save them from enduring that extended wait.
Avoiding probate is also wise if you want your beneficiaries to receive as much as possible from your estate. The fees associated with probate can reduce the value of your estate significantly. That is because they base the filing fee for probate on the dollar value of your estate.
There is one more downside to probate we need to discuss, and it affects privacy. The details in your will become public due to probate. However, you can keep those sensitive details away from members of the public with the help of a revocable trust.
Do not let the probate process get in the way of your beneficiaries. Instead, create a revocable trust for your beneficiaries and make it easier for them to assume ownership of your assets.
Revocable Trusts Can Be Amended at Any Time
The only constant in our lives is change. Certain elements of your life will likely be different a year from now. Imagine how drastically things could change in a decade.
Revocable trusts offer protection against the big changes that may take place in your life.
Unfortunately, many married couples end up divorced after some time. If your former spouse is still a beneficiary in your trust, you probably want to change that. You can do that relatively easily using a revocable trust.
There is also no guarantee that your relationships with your children will always be good. For one reason or another, you may see it fit to remove one of your children from your list of beneficiaries. Once again, you can do that easily thanks to your revocable trust.
Revocable Trusts Give You Continuing Control over Your Assets
Depending on how you set up your trust, you can maintain complete over your assets while you are still around. This is important because new opportunities may arise after establishing your trust.
By naming yourself as the trustee, you can maintain flexibility. You can do more with the assets in your trust and continue growing them for your beneficiaries. This is also a benefit you can enjoy for the rest of your life, so take full advantage of it.
Use Revocable Trusts to Outline Your Healthcare Wishes
Revocable trusts are useful not only for outlining how you want your assets distributed. You can also use that document to outline your preferred healthcare plan.
Use the document to indicate what type of care you want to receive if you fall into a comatose state or develop a condition like dementia that compromises your decision-making capabilities. Give a trusted friend or family member power of attorney over your healthcare decisions so they can follow your specific wishes.
Omitting your healthcare wishes from your revocable trust could end up with you receiving unwanted care. Be as specific as you can be when detailing these parts of your trust, so there is no doubt about your wishes.
Revocable Trusts Can Keep Assets Separate
Lastly, you should consider creating a revocable trust if you and your spouse have substantial non-marital assets. You do not want to assume that divorce is a possibility for you and your spouse, but it is good to be prepared for that possibility anyway.
Create a revocable trust and list your most valuable non-marital assets, so they will not get exposed during divorce proceedings. If you need to bolster your finances while divorce proceedings are underway, you can take assets out of your revocable trust.
Even assets you received while you were married can be stored separately in your revocable trust as long as they are your sole property. The inheritance you received directly from your parent is an example of that.
Revocable trusts make the division of assets following a divorce rather simple. The divorce proceedings can unfold faster because you exercised that added bit of caution.
How to Create a Revocable Trust
Have you settled on setting up a revocable trust for your beneficiaries? If so, we can help you get a better handle on the steps involved in that process.
As you will see below, the process of creating a revocable trust is not especially complicated.
Work with an Estate Planning Attorney
You must craft a revocable trust in a specific way to ensure that it accomplishes what you want it to. Unless you have experience crafting trusts, you will need some guidance.
Hire an estate planning attorney to help you assemble the trust document. Down the line, you can ask them to review the trust document to ensure it will not be vulnerable to any legal challenges. Your attorney can also help you move assets in and out of your revocable trust.
Select Your Beneficiaries and Trustees
Next, you want to name your beneficiaries and the people in charge of managing your trust.
Your beneficiaries can include about anyone. Feel free to name your spouse, kids, friends, or even your favorite charities as your beneficiaries.
When selecting trustees, you should choose someone you know will keep the best interests of your beneficiaries in mind. Spouses are popular picks, but you can also choose a close friend. If you want a neutral party to manage your trust, you can also hire an attorney to take on that role.
Outline the Terms of Your Revocable Trust
You can now start drawing up the terms of your trust. Carefully craft those guidelines to ensure that they will follow your wishes properly when the time comes.
At the same time, do not stress out too much about what you are putting in the trust initially. You can still make changes later because you are setting up a revocable trust.
Create and Notarize the Document for Your Revocable Trust
With the terms of your trust finished, you can now create the documentation for your trust. Seek guidance from your attorney at this juncture to ensure the document is correct.
Remember to sign the trust document in front of a notary public and have them notarize it. Once the document is notarized, you can move assets into your revocable trust.
How Do You Amend the Terms of a Revocable Trust?
Amending the terms of a revocable trust is easy, but how exactly is it done? You have two options to choose from here.
As the grantor, you can either use a trust amendment form or restate the terms of your trust. Trust amendment forms are useful for making relatively small changes. Meanwhile, restating the trust is recommended if you want to amend several statements in the original document.
Grantors need to be detailed when making changes to the existing trust. You should also clearly indicate how your changes will affect the terms outlined in your trust initially.
The documents containing your desired changes should also be attached to the original copy of your revocable trust.
Do you need help setting up your revocable trust? We at the Alber Law Group would be glad to help you out. Get in touch with us today so we can start laying the groundwork for your revocable trust.