A Revocable Trust – sometimes referred to as a “Living Trust” – is a lifetime trust that can be amended or revoked at any time during the creator’s life.  The creator (or “grantor”) of the trust typically also serves as trustee and is also a trust beneficiary during his or her life.   At the grantor’s death, the terms of the Revocable Trust direct how the grantor’s assets are to be distributed, essentially acting as a substitute for the Will.

Nonetheless, the grantor still executes a Will.  This is because the grantor may have failed to transfer title of certain assets to the Revocable Trust during life.  In that case, those assets would pass under the grantor’s Will.  The Will would then direct that those assets be “poured” over into the Revocable Trust, to be governed by the terms of the Revocable Trust.

What are the advantages to using a Revocable Trust?

  • Management of Assets During Period of Disability. If the grantor becomes incapacitated for any reason, the successor trustee may continue manage assets held by the trust.  The trustee may also use the trust assets to pay for the grantor’s expenses during his or her period of disability.
  • Streamlined Process of Managing Assets After Death. The successor trustees of the Revocable Trust will have immediate access to assets held by the trust at the death of the grantor.  This allows for a more streamlined process of distributing assets at death.  In addition, if the assets are to be held in continuing trust under the Revocable Trust agreement, court involvement may be minimized during the trust’s ongoing administration.
  • Avoidance of Probate. Assets that are transferred to the Revocable Trust during life avoid probate at death.  The advantages of avoiding probate will vary from state to state, however, depending on how costly or burdensome the probate court requirements are in the grantor’s particular state.
  • Privacy. Unlike Wills, the provisions of Revocable Trusts generally do not become a matter of public record during probate proceedings. This allows individuals to arrange for the disposition of their assets outside of the public eye.

What the Revocable Trust does not do

  • No Tax Savings. Even though the assets transferred into the Revocable Trust will be out of the grantor’s probate estate, the value of the assets will be included in the grantor’s taxable estate. For tax purposes, all assets in the Revocable Trust are treated as if the grantor owned them outright.
  • No Asset Protection. Because the grantor retains the power to revoke the trust, a Revocable Trust does not insulate the trust assets from the claims of any potential creditors of the grantor.

A Revocable Trust can provide many advantages, but it may not be appropriate for everyone.  An experienced estate planning attorney can help you decide whether a Revocable Trust is recommended for your particular circumstances.

 

 

Wealthspire Advisors is the common brand and trade name used by Sontag Advisory LLC and Wealthspire Advisors, LP, separate registered investment advisers and subsidiary companies of NFP Corp.
This information should not be construed as a recommendation, offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The commentary provided is for informational purposes only and should not be relied upon for accounting, legal, or tax advice. While the information is deemed reliable, Wealthspire Advisors, LP cannot guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with regard to the results to be obtained from its use. © 2019 Wealthspire Advisors

Nicole Hart, J.D.

Nicole Hart is head of our trusts & estates department and works in our New York office.