Do I need a Revocable Living Trust?
What is a Revocable or Living Trust?
A Revocable Trust is a legal entity that you control until you pass away. The trust holds assets that you place inside of it. During your lifetime, you maintain control of everything in the Trust. Think of it like a box. When it is created, the box has nothing inside. You can add assets to the box, take assets out of the box and make changes to the box during your lifetime. At your death, the trust “box” becomes final and the trustee is responsible for distributing the assets according to the document.
These trusts can be useful tools in administering your estate and ensuring your assets are distributed to the next generation efficiently during a challenging time. However, in some cases, revocable trusts are more expensive in time and legal fees than they are worth. Here is our perspective on when you should - and should not - consider a revocable trust.
Why you may want to include a Revocable Trust in your estate plan:
Immediate, clear asset control if you are incapacitated
Moves assets out of the Probate court process. This streamlines asset distribution after your death. This is especially useful for business or real estate assets that would require day-to-day management by your executor and court supervisions during the probate process.
No public record. Assets in the trust are not made public at your death through court proceedings. Note that some states allow parties to waive asset inventories, which are often the source of for public asset disclosure. If you can waive the asset inventory in your state, your assets can transfer in private without the expense of creating a Trust. So privacy is a good topic to discuss with your estate attorney.
Minimizes probate costs. Keep in mind, probate costs are generally based on the size and complexity of your assets. For smaller, less complex estates, probate may be less expensive than creating a trust.
What a Revocable Trust will not help with:
Avoiding taxes or creditors. Assets in a revocable trust are under your control until you pass away and thus are treated as if you owned them directly. Other types of irrevocable trusts are used to mitigate estate taxes or protect assets from different types of creditors
Eliminating the need for Probate Court. It is unlikely that every single asset you own will be titled in the name of the Trust. Revocable Trusts will reduce the burden and expense of the probate process, but will likely not eliminate it entirely.
If you choose to create a Revocable Trust, you MUST retitle your assets in the name of the trust. This will mean opening new bank and brokerage accounts, re-titling your home and potentially altering business formation documents. Like the empty box, the trust itself is useless if assets are not titled properly.
In conclusion, a revocable trust tends to increase in usefulness as the size and complexity of your estate increases. Revocable trusts aren’t for everyone, but they are an important topic to discuss with your attorney during the estate planning process.
Think you might benefit from professional expertise and guidance? Schedule an intro call to connect with our team. In these meetings, we simply ask a bunch of questions to get to know you and your situation. If we both think there is a fit, then we will schdule a subsequant meeting to discuss a specific proposal designed around your needs. Not ready for a call? Listen to The 6 Figure Investor Podcast anywhere you listen to podcasts.
Note: This is our guide to Revocable Trust and it is not comprehensive. It should not be taken as specific tax or legal advice. We also don’t pay or receive referral fees from attorneys and are not a marketing service for attorneys. So, if this created concern for you, schedule a meeting to get the expertise your need! (It should be self-explanatory but we had to say it).