Estate planning involves many different documents, including a Last Will and Testament (wills), Trust, Durable Power of Attorney and Advanced Health Care Directive. Many people may benefit from creating a trust. However, some hesitate because they have questions. Should it be revocable or irrevocable? What should they put in the trust? Who should be the trustee? To answer these questions, it helps to begin with what kind of trust to create. There are several benefits of a revocable trust, which is the most common trust. If you are ready to create a trust, consider contacting a San Francisco estate planning attorney from Von Rock Law by calling (866) 720-0195 to discuss your options.
What Is a Revocable Trust?
The two types of trusts are revocable and irrevocable. Both are created by a grantor and funded when the grantor transfers property into the trust. Both have a trustee, and both have beneficiaries. However, there are some significant differences between the two.
A revocable trust includes terms that can be changed or canceled whenever the individual who created the trust, the grantor, decides. The grantor can move property in and out of the trust; change, add, or remove beneficiaries; and even dissolve the trust if desired. As long as the grantor is alive and mentally competent, any income that the property in the trust earns belongs to the grantor.
Upon the grantor’s death, a revocable trust becomes irrevocable. The property in the trust then transfers to the named beneficiaries.
An irrevocable trust cannot be modified, amended, or terminated without permission from both the grantor and the beneficiary or beneficiaries named in the trust. Additionally, any property in the trust or income earned by the property is owned by the trust, not the grantor.
Who Might Need a Revocable Trust?
Many people might benefit from a revocable trust. Though there are other benefits of a revocable trust that they may want to consider, individuals may set up a revocable trust if they want:
- To avoid the probate court process in the County of San Francisco
- To have someone else to manage their property
- To ensure that their property will continue to be managed if they die or are incapacitated
- To provide a certain level of privacy in the administration of their estate while alive and upon their death
What Are the Requirements for a Revocable Trust?
Creating a revocable trust is not as simple as just making the decision. There are a few requirements that must be met. To create a revocable trust, there must be:
- Trust property — money, real estate, or other property to fund the trust
- Grantor — the person who transfers property into the trust and creates the terms of the trust
- Trustee — the grantor or someone else the grantor appoints to whom trust property is transferred, who receives legal title to the property in the trust, and who manages and distributes trust income while following the terms of the trust
- Beneficiary — at least one individual who gets a direct or indirect benefit from the trust income
- Legal competency — both grantor and trustee must be legally competent
- Notarized signature — the trust document must be signed in front of a certified notary
- “Pourover Will” — the Superior Court of California also recommends creating this type of will alongside the trust to ensure that any assets in the grantor’s own name will be placed in the trust after his or her death
What Is One of the Main Advantages of a Revocable Trust Over an Irrevocable Trust?
There are many reasons an individual may consider a revocable trust instead of an irrevocable trust. Perhaps the main advantage of a revocable trust is the flexibility that an irrevocable trust does not have. A revocable trust offers the option to make changes to the trust, whereas an irrevocable trust does not.
This flexibility and option to make changes to the trust when the grantor desires can be helpful. If the grantor’s financial situation or needs change, the flexibility of the revocable trust allows the grantor to make sure the trust still meets those needs. An irrevocable trust locks the individual into his or her original choices, regardless of how circumstances change later. A seasoned attorney from Von Rock Law may be able to help you determine if a revocable trust is right for your estate planning needs.
What Is the Primary Purpose of a Revocable Living Trust?
The primary purpose of a revocable living trust is that it provides a way to ensure continued management and preservation of an individual’s assets upon his or her death or incapacitation. The trust clearly states what the person’s wishes are so the trustee can carry them out with no disruption.
A revocable living trust also allows the beneficiaries to avoid probate court proceedings after the death of the grantor. Because the trust defines who the beneficiaries are and how the property is to be distributed, it does not need to go through probate. This can save a substantial amount of both time and money.
Other Benefits of a Revocable Trust
Other benefits a revocable trust offers include the following:
- If an individual has property in another state, recording the deed to that property to the trust can allow the beneficiaries to avoid ancillary probate (probate in another state)
- Unlike a will, which can only have one original, revocable trusts can have multiple original documents, which can simplify property transfer after a person’s death
- In some cases, establishing a trust may save money on estate and income taxes
- A trust may stand up better against a challenge than a will, which can be especially important for a person concerned that someone may contest the will
- The individual who creates the trust can be the trustee, which is not possible with an irrevocable trust
Disadvantages of a Revocable Trust
While there are many advantages to a revocable trust, there are some disadvantages that should be considered before creating a trust. Some of the disadvantages include the following:
- There is no asset protection. The assets in the trust are not beyond creditors’ reach if the grantor is sued. This also applies in lawsuits where the individual is held liable for damages or injury to another.
- After the trust is created, the property being placed in it must be retitled into the trust’s name. Any assets not retitled in the trust’s name will be considered as belonging to the individual and will have to go through probate upon that person’s death. The assets will also not be managed if the individual becomes incapacitated.
Contact an Estate Planning Attorney to Create a Revocable Trust Today
There are many benefits of a revocable trust. Whether you want your beneficiaries to avoid probate after your death or want to put your assets in the trust for management during your lifetime, a properly created and funded trust may serve your needs. Whether you are ready to create and fund your trust in San Francisco or have more questions, consider contacting an experienced estate planning attorney from Von Rock Law by calling (866) 720-0195 to discuss your estate planning needs.