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Did you know that a revocable trust could actually be more beneficial than a will?
Most people don't, which is why we're here to explain exactly what a revocable trust is and how you can benefit from it.
What is a Revocable Trust?
Similar to a will, a revocable trust designates who your property goes to after death. But it has one huge advantage over a will: it doesn't go through probate court.
It is called a revocable trust because it has the ability to be easily modified or revoked. This means you can add or remove assets or dissolve the trust entirely.
A revocable trust falls in the “living trust” category. This simply means that the trust is valid throughout the life of the grantor.
Benefits of a Revocable Trust
While the biggest benefit of a revocable trust is the ability to avoid probate, there are many other pros to setting one up.
First, let’s go over some basic terminology to simplify things.
Grantor - The person (or group of people) who sets up the trust and contributes to it
Trustee - The party that oversees the trust and ensures assets are properly distributed
Beneficiary - The party that receives contents from the trust
Avoid Probate
The best part about a revocable trust is that it completely avoids probate.
Whether a person dies with or without a will, their estate will most likely have to go through a probate court. Probate is a lengthy process that ensures a person’s outstanding debts are paid and their remaining assets get distributed accordingly.
When an estate goes through probate, it becomes part of the public record for anyone to see. Probate is time consuming and expensive – your beneficiaries won't receive your assets very quickly. This can all be avoided with a revocable trust.
It's Easy to Make Changes to or Dissolve Completely
Another huge plus to a revocable trust is that it's easy to modify or dissolve.
You won't have to worry about getting everything 100% figured out right now. It's important to set up a revocable trust in case the worst case scenario happens. However, revocable trusts offer a lot of flexibility for future changes.
You Can Retain Control of Assets in the Trust
A revocable trust allows the person or people establishing the trust to control the assets that are placed into the trust during their lifetime.
With a revocable trust, you have the ability to wear the hats of all three parties simultaneously: the grantor, the trustee, and a beneficiary.
As the grantor, you can also list yourself as a beneficiary to receive property from the trust as you see fit.
Because you still maintain ownership of the assets in your trust, those assets aren't safe from creditors or lawsuits. That protection is only provided by an irrevocable trust.
Everything Stays Private
When the grantor dies, the assets that are left in the trust immediately get passed to the other beneficiaries listed.
The property never enters probate court, so everything is kept out of public record.
While privacy is especially appealing for those with large estates, anyone can benefit from keeping their family's finances private. Oftentimes, when asset allocation becomes public, friends and family come out of the woodwork to contest who got what in an effort to receive something.
Asset Protection for Your Beneficiaries
Because a revocable trust avoids probate, you're providing strong asset protection for the beneficiaries of your trust.
Instead of your assets going through probate court and being distributed according to how the judge sees fit, a revocable trust explicitly determines exactly who gets which assets based on your decision.
Plus, beneficiaries will receive your assets much faster through the revocable trust than through probate court.
Pros and Cons of a Revocable Trust
Knowing the pros and cons of revocable trusts can help you make a decision on whether or not it is the right choice for you.
Pros of a Revocable Trust
Avoid costly probate
Assets are immediately transferred upon death
Finances stay out of the public record
Can be modified or dissolved
Cons of a Revocable Trust
No immediate tax benefits
Assets aren’t protected from creditors
A lot of documentation
How Does a Revocable Trust Avoid Probate?
A revocable trust avoids probate because the assets are entrusted to the trustee, who is responsible for distributing assets to beneficiaries after your death.
This means the grantor no longer owns the assets, the trust does. The named trustee will then have the sole authority over your former assets, ensuring they're properly passed to beneficiaries upon your death. If you decide to go this route, make sure the trustee is someone you trust.
Who Needs a Revocable Trust?
Anyone who wants to avoid their assets going through the probate needs a revocable trust. There are other ways to avoid probate, but few will allow you to maintain control over the assets in your trust.
Avoiding probate saves loved ones from paying court fees and gets them their assets much quicker.
Get Professional Help Creating Your Revocable Trust
If you want full control over your assets and how they are distributed, you might want to consider a revocable trust.
We completely understand how overwhelming the estate planning process can be without the proper help. If you have any questions about revocable trusts or want to find out if it is right for you, call us or send us a message. We are happy to help in any way we can!