What is a Revocable Trust?

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A Revocable Living Trust, also called an intervivos trust, is a trust created during a person’s lifetime and is designed to give the grantor (creator) flexibility and control over his or her assets.  With a Revocable Trust, you may act as your own Trustee, thereby maintaining complete control over your assets during your lifetime. With a Revocable Trust, assets can be freely transferred in and out of the Trust.  You can also change or revoke the Trust at any time and make all decisions regarding the Trust. Since a revocable trust is a grantor trust, your social security is used to identify the trust and all income generated from the trust assets is taxed to you – avoiding the compressed tax rates.

Reasons to Consider a Revocable Trust

Avoid Probate

The primary reason people choose a revocable trust in estate planning is to avoid probate. Even though the initial cost to create a Revocable Trust may be more than the cost of executing a Last Will and Testament, spending the money to do a trust now may save your family money in the long run since trusts avoid the probate process.  Probate is the process wherein a Last Will and Testament is admitted to Surrogate’s court. Like any court process, it costs money and can delay the process if an heir is being disinherited.

Out of State Property

If you have real property in more than one state, you may want to put those properties into a revocable trust to avoid having to go through the probate process in each state.  The rule is that in each state that you “own dirt” you will need a separate probate, called ancillary probate.  This can be lengthy and costly when you own properties in multiple states.  Another reason to avoid probate is if you do not have easily identifiable heirs or if you are disinheriting one of your natural heirs.  Regardless of who you have named as beneficiary of your Will, notice of probate must be sent to your next of kin.  If this includes a daughter that you are disinheriting or if your next of kin are your third cousins whom you have never met, you may not want notice to be sent that your assets are being distributed.  You would also want to avoid probate if you have a disabled beneficiary because the Court will have to appoint a lawyer to represent that person’s interests in the probate proceeding.  In all of these scenarios it is advisable to avoid probate because it will likely be very time consuming and cost a lot of money.

Incapacity

In the event of your incapacity, a Revocable Trust can provide for a seamless transition for the management of your affairs.  The person(s) you have selected as successor or co-Trustee would simply take over the management of those assets titled in the name of the trust, possibly avoiding the need for a Property Management Guardian.

Disinheriting a Natural Heir

If you plan to disinherit an heir, such as child, avoiding probate should be your goal. Should probate be required in order to administer your Estate, even though you have chosen to disinherit a family member, a distribute (anyone who would inherit if you died without a will pursuant to the intestacy statute) will be given notice of the proceeding and an opportunity to challenge your Will.  In New York State, you can disinherit your children, but although your wishes will likely be upheld, navigating through the process can be costly and time consuming, resulting in a smaller inheritance and delay for your intended beneficiaries. With a trust, unlike a probate proceeding, there is no notification required when a trust is administered.  Your trustee can simply distribute the assets as you have set forth in the trust agreement.

Types of Assets To Place in a Revocable Trust

Placing an item in a trust simply means retitling that asset in the name of the trust. Therefore anything – even personal property and art work can be placed in a trust. Assets commonly transferred into these trusts include residences and investments such as bank accounts, business interests, certificates of deposit, stocks and bonds.

How to best structure your estate plan is an important and personal decision, which you should discuss with your Estate Planning Attorney and Financial Planner before making any final decisions.

Learn more about estate planning here.

Nancy Burner, Esq.

Burner Law Group, P.C.

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