How Well Does a Revocable Trust Work in Estate Planning?

There are people who still think that trusts and estate planning are only needed by wealthy families to protect their millions and billions. However, that’s not true. Estate planning, wills, and trusts are for every family who wants to protect their assets.

There are as many different types of trusts as there are situations that call for their use. Knowing which trust you need and how it can work to benefit the family, is necessary before any trusts are created.

As Forbes explains in its recent article, “Revocable Trusts: The Swiss Army Knife Of Financial Planning,” trusts are a critical component of a proper estate plan. There are three parties to a trust: the owner of some property (settler or grantor) turns it over to a trusted person or organization (trustee) under a trust arrangement to hold and manage for the benefit of someone (the beneficiary). A written trust document will spell out the terms of the arrangement.

One of the most useful trusts is a revocable trust where the grantor creates a trust, funds it, manages it by herself and has unrestricted rights to the trust assets. The grantor has the right at any point to revoke the trust, by simply tearing up the document and reclaiming the assets, or perhaps modifying the trust to accomplish other estate planning goals.

After discussing trusts with your attorney, he or she will draft the trust document and can help you in the process of re-titling property to the trust. The assets transferred to a revocable trust can be reclaimed at any time. The grantor has unrestricted rights to the property. During the life of the grantor, the trust provides control and management of trust assets, if and when it’s needed.

Let’s examine some of the potential lifetime and estate planning benefits achieved through a trust plan:

• Management Benefits. If the grantor is unable or uninterested in managing the trust, the grantor can hire an investment advisor to manage the account in one of the major discount brokerages, or he can appoint a trust company to act for him.
• Incapacity. A trusted spouse, child, or friend can be named to care for and represent the needs of the grantor/beneficiary. She will manage the assets during the grantor's incapacity without having to declare the grantor incompetent and petitioning for a conservatorship over the grantor.  A conservatorship can be a stressful legal proceeding that declares a person incompetent and appoints another as their conservator, someone who is in-charge of their financial decisions and assets. This proceeding can be expensive, public, humiliating, restrictive and burdensome. However, a well-drafted trust (along with powers of attorney) avoids the conservatorship process because a grantor can state the process for how they will be succeeded as trustee and who will be the successor trustee.  After the grantor has recovered, the grantor can resume the duties as trustee.
• Probate. The revocable trust is a great tool for estate planning because it bypasses probate, which can mean considerably less expense, stress, and time associated with the probate court's supervised process.

In addition to a trust, ask your attorney about the rest of your estate plan: a will, powers of attorney, medical directives and other considerations.

Start by talking with an experienced estate planning attorney about what you want to achieve. This includes distribution of assets, minimization of taxes, passing wealth across generations, or protecting heirs from creditors. Your attorney will create a plan that is best suited for your unique situation.  Contact the Soto Law Firm today to discuss your options and how you start the estate plan process.

Reference: Forbes (February 20, 2019) “Revocable Trusts: The Swiss Army Knife Of Financial Planning”