In real estate titling the home in a trust is a common topic of discussion. Below is a quick summary of a revocable trust, and how it may benefit your situation:
Understanding Revocable Trust
A revocable trust is a part of estate planning that manages and protects assets as the grantor, or owner, ages. The trust is amended or revoked as the grantor desires and is included in estate taxes. Depending on the trust’s directions, the trustee, or holder of the assets, distributes the assets to the beneficiaries or holds and manages the property. The trust remains private and becomes irrevocable upon the grantor’s death.
What does it do?
Ensures privacy: The main purpose for a revocable trust is to avoid probate, the legal process of distributing assets of a decedent at death. Why? Because the probate process which includes taking an inventory of assets, notifying and paying creditors, etc., is made available to the public. By avoiding probate, the privacy of the grantor and their beneficiaries is protected.
Adheres to the wishes of the grantor: Similar to a will, a revocable trust will provide a thoughtful distribution of their assets to their heirs. The trust document can be amended an unlimited number of times, so the distribution of assets can be changed as the grantor ages or additional assets are acquired. At the death of the grantor, a trustee named in the trust document will work with the executor of the estate to follow the guidelines of the trust document.
Creditor protection for beneficiaries: While revocable trusts do not provide creditor protection for the grantor, they do for the beneficiaries of the trust, but only if the assets remain in the trust upon the passing of the grantor.
May reduce state estate taxes: For families living in a state with an additional estate tax, a well-written revocable trust may provide significant value by reducing state estate taxes.
Trusts are created by individuals (grantors) and their lawyers to determine how their assets will be managed by trustees and ultimately transferred to beneficiaries, after their death.
Revocable trusts let the living grantor change instructions, remove assets or terminate the trust.
Irrevocable trusts cannot be changed; assets placed inside them cannot be removed by anyone for any reason.
Revocable trusts allow beneficiaries to avoid probate court and guardianship or conservatorship proceedings; they also allow documents to be kept private.
On the downside, revocable trusts have high upfront costs, involve many steps to fund, don’t exempt you from needing to make a standard will too, and allow your heirs a longer period of time to contest
Sources: https://www.investopedia.com/terms/r/revocabletrust.asp , https://www.glassmanwealth.com/blog/4-reasons-you-should-consider-a-revocable-trust/