Revocable Trusts

Clients with significant probate assets should consider a Living (Revocable) Trust (“Revocable Trust”) to minimize the probate process and its costs, ensure proper management of assets during incapacity, and maintain privacy at death.  A Revocable Trust is created during your lifetime to manage and protect your assets in the event you become disabled, sick or otherwise incapacitated; however, it can be revoked or amended at any time.

With a Revocable Trust, you (as the grantor) transfer your property to a trustee (who may be you, individually, or in conjunction with a designated co-trustee) to own and manage the transferred property (corpus) per your direction and for your benefit.  During the grantor’s lifetime, any income generated by the trust is taxed to the grantor.  Upon the grantor’s death, the trust becomes irrevocable, and the successor trustee is directed by the terms of the trust agreement to distribute the corpus to your beneficiaries or continue to hold, manage and distribute for their benefit as specified in the trust agreement.  For example, just like a Complex Will, a Revocable Trust might provide for distribution into further trusts at the grantor’s death to achieve favorable wealth transfer tax planning and/or ensure the preservation of trust assets from spendthrift beneficiaries and their creditors.

A Revocable Trust often serves as a will substitute to not only transfer property at death but also provide for the management of trust property during the grantor’s lifetime in the event of incapacity.  A pourover will should be executed in conjunction with a Revocable Trust to transfer any remaining or newly acquired probate assets into the trust at death so that they can be distributed in accordance with the terms of the trust after passing through the probate process.  Although the assets transferred to a Revocable Trust avoid the probate process, they do NOT avoid federal estate tax or offer any form of asset protection to the grantor.

You always should seek the guidance of an experienced estate planning attorney before executing any trust agreement.