Is a “Lifetime” or Revocable Trust for You?
In certain, but not all, situations, it may make sense to create and fund a “lifetime” or revocable trust. The below are a few factors you should consider in determining whether such a trust makes sense for you.
What are the Benefits of a Revocable Trust?
Avoid Court Meddling
Many people desire to avoid court intervention in the distribution and division of their assets. People believe that involving the courts drags out the process, delays the distribution of assets, and results in higher legal fees. Establishing a “lifetime” (or revocable) trust may eliminate the need for court intervention.
Note that certain counties may require you to disclose the existence of a revocable trust in the event that you ultimately file for probate. Although you may have to disclose the trust, you will not need to obtain “Letters of Trusteeship” for the trust. Not having to obtain separate “Letters of Trusteeship” eliminates the Court oversight and reduces the administrative burdens.
Ease of Administration
Having a “lifetime” trust allows you to place assets, regardless of size and location into the trust, thereby creating one general operating base. For example, you may decide to place properties held across several states into the trust. You may also decide to transfer bank accounts held with various financial institutions into the trust. This way, all assets may be acted upon uniformly and in accordance with your wishes.
Direct Distribution of your Assets
When you place beneficiary designations on assets, or create joint accounts, you are directing that the entire asset pass, all at once, to the person you have designated. Under such an approach, you are not able to control or temper distributions. If you create a trust however, you may direct that a portion of the funds be held back or delayed or kept in further trust upon the occurrence of a certain event (e.g. beneficiary turning a certain age or reaching a certain milestone).
Creating a trust and controlling further distribution of assets may similarly be beneficial when your beneficiary is, or is expected to, receive government benefits. By controlling distribution, you can help ensure the beneficiary continues to receive those benefits along with the amount you have set aside for them.
Create Flexibility for Future Planning
Creating a lifetime trust is one way to plan for disability or incapacity.
- First, by creating a trust, you may be able to provide a smooth succession plan for the management of your assets by specifying, in your trust, who you would prefer to handle the finances in the event of your disability.
- Second, in the event you become disabled, all of your assets are already in one place and you can undertake certain acts to prepare for long term care planning (e.g. make the trust irrevocable and commence medicaid planning).
The beauty of a trust is the limited number of people who, in the absence of litigation, can access the document. A trust is ordinarily viewable by the creator of the instrument, the trustee(s) of the trust, and the beneficiaries (to the extent of their interest).
If you have nosy family members, or, if you are concerned, for example, about the reaction of one family member to your decision to provide (or not provide) for another family member, then you may opt for a trust
Remember, if you establish a trust, only assets placed into the trust will be subject to the rules of the trust. Therefore, if you do choose to establish a “lifetime” (or revocable) trust, remember to discuss, with your attorney, which assets should be transferred to the trust immediately in order to maximize the effectiveness of the trust.
Additional resources provided by the author
For more information, please contact estate planning attorney Regina Kiperman:
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