The revocable trust isn’t always the first estate planning tool most of us have on our minds when we start to prepare our legacy plan. It’s far more common for the average person to begin with a Last Will and Testament, and then add powers of attorney and advance directives for healthcare to the plan. Together, those tools can provide basic protections that can help to safeguard his estate and family both during his life and after he’s gone. Add to that the fact that many people still think of trusts as the “rich man’s” tool, and it’s easy to see why so many people don’t automatically see the need for a trust in their estate planning efforts. The fact is, though, that revocable trusts can offer just the flexibility most people need to resolve complex estate planning challenges.
The Basics of the Revocable Trust
The revocable trust is like other trusts in its structure and purpose. It has certain elements common to all trusts, including a grantor, trustee, and beneficiaries, and it serves that most common of trust purposes: it enables you to transfer your property to a trustee, who then holds and uses it for the benefit of one or more beneficiaries. The management and distribution of those assets is defined through the trust terms, which are executed by the trustee. As the name suggests, this type of trust can be revoked or otherwise changed if the grantor’s circumstances later require a different approach to estate planning.
Why Some People Hesitate to Use Trusts
While trusts are growing in popularity, there are still many people who are understandably reluctant to use them in their own estate planning efforts. That reluctance is often related to the need to fund the trust with your own assets. Since that funding involves signing over ownership of your property to the trust, it’s easy to see why so many individuals and families are skeptical about the idea. Fortunately, however, the revocable trust is flexible enough to enable those concerns to be minimized.
The thing that most people don’t understand about revocable trusts is that they are designed in a way that provides you with the option to retain control over those assets while you’re alive. You can even continue to use them. This is accomplished by naming yourself as the trustee for the trust, and naming another person to serve as successor trustee when you’re incapacitated or dead.
Benefits of a Revocable Trust
That ability to name yourself as the trustee of your own revocable trust is just one of the benefits of using this type of tool, but it is an important one. You not only maintain the ability to control those assets, but can continue to use them for your benefit by naming yourself as the trust beneficiary too. That way, you can manage the assets, transfer assets in and out of the trust as needed, and use those assets as well. Of course, you should name successor beneficiaries who will receive the trust assets when you pass away.
Other benefits of the revocable trust can provide even more flexibility:
- These trusts are revocable. That means that you can change your trust or cancel it any time you need to do so, and the trust automatically becomes irrevocable when you pass away. There are obvious advantages to this feature, since you are never required to lose ownership in a way that cannot be later reversed. That’s helpful for people who might worry about potential changes in their financial circumstances in the future.
- The revocable trust will keep trust property out of probate when you die. That’s because probate is for property that is in your name – which excludes any assets owned by the trust. That feature can help your heirs to avoid a time-consuming and costly probate process that could reduce the size of their inheritances through lawyer fees, court costs, and other probate expenses that often consume a sizable percentage of any probated estate.
- Your revocable trust will also preserve your privacy in ways that your Last Will and Testament cannot.
How to Maximize Trust Flexibility
Even beyond the basic flexibility provided by a revocable trust are the added levels of flexibility that you can include within the trust by inserting various provisions within the terms. For example, you can include a trust protector to ensure that your trust performs as planned. You appoint either an individual or organization to see that the trust is managed properly by the successor trustee, and empower that protector to make changes when necessary.
For example, if new laws passed at some future point in time would work to the trust’s disadvantage, the trust protector would have the authority to make changes to the trust terms to ensure that its core benefits remain intact. Moreover, if a successor trustee were to fail in his duties, the trust protector could be given the power to remove and replace that person. Alternatively, you could grant a similar power to the trust’s beneficiaries.
You can also maintain maximum flexibility by focusing on the selection of the right trustee – and including more than one successor trustee when you set up the trust. You should also think carefully about how you define various beneficiary classes, to consider all the current and future heirs you might want the trust to benefit. An experienced estate planning attorney can help you to ensure that you have the right amount of flexibility built into your revocable trust.
Get the Help You Need
Once you understand how the flexibility of today’s revocable trusts can help you to achieve your estate planning goals, you’ll have an easier time overcoming many of the most common challenges you’ll face as you craft your legacy plan. At Michigan attorneys Biddinger, Bitzer & Estelle, PLLC, we have the trusts experts you need to ensure that you have the revocable trusts you need to meet your estate planning objectives while maintaining the flexibility needed to address even the most complex concerns. To find out more about how these trusts can benefit you, contact us online or call us today at (989) 872-5601.