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A revocable trust is an estate planning agreement in which the provisions can be altered or canceled as per the grantor's wish or life changes. The assets added are distributed to the grantor during the trust's life and transferred to the beneficiaries upon the originator's death.
Living revocable trusts allow for change as your life evolves. Families with changing situations or those who would like to consider other estate planning options prefer revocable trusts. You can switch the trustees, modify or eliminate beneficiaries, or change how the estate is distributed based on your current life scenario. Moreover, living revocable trusts can also be voided entirely if required. So, whether you wish to make small changes over time, one radical change at once, or even if you want to revoke the current trust and create an entirely new one, you can manage it all easily.
All you have to do is enact a revocable living trust amendment. Once enacted, it replaces all the previous provisions of the trust.
Unlike irrevocable trusts, revocable trusts offer zero relief from family trust estate tax. This is because the person creating revocable trusts maintains control over the assets. They have the liberty to make amendments as they wish. As long as the estate's assets remain in the revocable trust's control, the estate taxes are included on the form.
Whether you are a trustee for someone else or planning for the estate tax, the value of the trust sometimes significantly decreases. These assets must be stated when you complete Form 706.
A revocable trust is created using a trust agreement signed between three parties, namely: the trust maker, also known as the grantor or settlor, the trustee, and the beneficiary. Once the assets have been funded into the trust's name, the trust maker loses the property's right to ownership. In other words, they will be owned by the trustee for the beneficiary's benefit. Probate is not required to transfer the ownership upon the grantor's demise because the trust creator doesn't own the estate.
A will generally opens your estate to public record because it goes through the probate process. This may create trouble for you by exposing your valuable assets to potentially harmful people. A revocable trust is a private document even when you are no longer in the world, thereby ensuring your estate plan's privacy.
Revocable trusts fail to offer protection against legal claims. This is because while the trust is a legal entity, you are named the owner of the trust's assets for legal purposes. When you set up a typical probate-avoidance revocable trust, you generally name yourself the trustee, which gives you complete control over the assets.
While this is great for controlling your assets, if a creditor pursues legal action against you or you are sued, the assets in your revocable trust are at risk. If you lose a lawsuit, the judgment generally favors the creditor who may close the trust, and assets are handed over to the winning party.
With revocable trusts, you cannot only change what your trust holds, you can also decide the future trustee. For example, suppose you become incapacitated, and all you have is a will. In that case, the court retains the right to appoint a conservator for you and supervises the estate distribution through a conservatorship proceeding. A trust can specify exactly how you want the estate planning to be done and make sure you transfer the decision-making rights to someone you know and trust.
Another great advantage offered by the revocable trust is the ability to provide uninterrupted investment management. This is effective regardless of the grantor becoming disabled or dying. If the assets have been previously transferred into the trust's name, there is no requirement to register securities again after the grantor's death. It also frees you from developing a new investment strategy to adjust the grantor's estate's cash needs and investment goals.
With revocable trusts, assets are available immediately after the grantor's death to raise cash and pay for credits and administration expenses without waiting for the probate decree or initial letters issuing. If the trust is funded before demise, the trustees become asset owners before the death and after. The assets are immediately available for liquidation if required.
Complete Wills can assist you with your estate planning requirements and questions about revocable trusts with a wide range of templates available for downloads and an extensive resource library. Discover the ins and outs of planning and create a legally binding trust online today.