One of the types of trusts that can be formed as part of an estate plan is a revocable trust. This is a trust that, during the course of your lifetime, you would have the ability to change or revoke.
There are many benefits that having a revocable trust can provide. These include:
- Control during life: When you put assets in a revocable trust, you can still maintain a great deal of control over them during your life. Part of this comes from your ability to change or eliminate the trust if you so choose. Also, you could name yourself the trustee of the trust for your lifetime, which would give you control of the management of the trust.
- Putting your wishes in control after death: When you die with a revocable trust, it’s terms dictate how the assets in it will be distributed moving forward. These terms can be tailored to your specific wishes and family situation.
- Asset protection to heirs: A revocable trust automatically becomes irrevocable upon your death. If the trust contains a “spendthrift” provision, it can protect the inheritance from your heirs’ creditors.
- Probate avoidance: Assets in this type of trust generally don’t go through probate.
- Simplifying matters with out-of-state assets: When you die with assets from multiple states, your estate could end up having to navigate several different probate processes. Through their ability to avoid probate, these trusts could help prevent this.
- Privacy: Probate is generally a matter of public record. Trusts, meanwhile, are not. So, having a trust can help keep the distribution of your assets upon your death a private matter.
There are limits, though, to what revocable trusts can do. For example, when you create such a trust, it generally will not provide creditor protection for you during your lifetime.
Also, mistakes in the drafting or formation of such a trust could cause it to not have the intended benefits.
Finally, revocable trusts can fall short in being helpful if they are ill-suited for the particular situation or aren’t well-aligned with the rest of your estate plan.
So, when a person is considering using a revocable trust to achieve his or her estate planning goals, it can be important for him or her to get experienced legal guidance on whether it would be a good fit and what can be done to maximize the potential benefits of this type of trust.
