Last week, I listed a few reasons why people don’t necessarily need a revocable trust. So, not to be too contrarian, I figured I should also explain that sometimes a trust is the right mechanism for people’s estate plan. There can be a variety of reasons to create a revocable trust. Just like a will, they have a variety of post-death planning language. They can address different situations for married couples, children, grandchildren, gifts to charities, and whatever creative desires you have. One common misconception that I run into is that a trust creates “tax savings” to the person who creates it. However, if you maintain control over the property in the trust and receive income from it, you are still taxed on that income.

Why Should I Create a Revocable Trust?

You can find all kinds of creative reasons to create a revocable trust. The most common ones that you’ll hear from attorneys:

  • Avoiding probate;
  • Plan for incapacity; and/or
  • Handling out of state real estate.

In 99.9% of my legal strategy sessions, the main driving concern is to avoid probate (whether by will or trust). If you own property only in your name at the time of your death, then a probate proceeding is needed to distribute the property. However, if you have placed the property into a trust, then the trust controls the distribution and there is no need for a probate proceeding. Since probate proceeding files are technically open to the public, for those who are really concerned about their privacy, this can be a key motivation.

If you are managing a bunch of assets, a revocable trust can also make sense. When you become incapacitated, the trust can choose someone else to manage the assets. If you become sick or unable to continue to manage the assets, this provides for a smoother transition while protecting your hard-earned assets. Similarly, when you are deceased, the chosen trustee can step in and handle the trust assets for you.

As we plow ahead towards winter, many folks are headed south for warmer pastures. For those who own a second home in another state, a trust can be used to manage both properties. In many states, without a trust, both properties would be subject to probate proeedings. The personal representative for your estate is then dealing with probate in at least two different states. It’s a headache that can be avoided through a trust. If the property is in a trust, the trustee can simply transfer the assets as the trust dictates.

Next Steps

Of course, if you don’t have a will or a trust yet, or if you have one that you may need to update, call my office to set up a legal strategy session and we can review the best options for you – (877) AMAYERS.

Andrew Ayers
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I work with business and estate planning clients to craft legal solutions to protect their legacies.
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