People accumulate money, property, and assets during their lifetime. One of the problems that senior adults will face is to leave all their stuff when they pass away. Without proper planning, the relatives of those who pass may argue over the deceased’s estate. Likewise, when people die, all assets titled in their name will be frozen until the courts decide who to transfer these assets to. If the deceased left a will, the will goes through probate to determine the transfer of assets. This process may take a long time and may become too costly for the remaining heirs. Fortunately, there is another option to name the beneficiaries of your assets at the time of your passing. This option is the revocable trust.
What is a Revocable Trust?
A trust is an estate planning tool in which you authorize another individual or entity to handle your estate for your beneficiaries. A trust and a will are similar because they give instructions on how your assets are transferred and divided among your beneficiaries. However, a will becomes active only after your death. On the other hand, trust becomes legally active the moment you sign the documents. There are two types of trusts that you may have drafted for you by your estate lawyers – the irrevocable and the revocable.
The terms of an irrevocable trust are set in stone the minute you sign the agreement, which includes who will handle your estate. On the other hand, you may change the terms of a revocable trust while still living.
What are the Advantages of a Revocable Trust?
The main advantage of setting up a revocable trust is to avoid your assets being frozen and going through probate. With a revocable trust in place, your assets will be transferred directly to the beneficiaries that you have assigned in the agreement. To have an effective revocable trust, you have to retitle your assets in the trust’s name to avoid these assets going through probate. Another advantage of a revocable trust is that it is seldom contested in court.
A revocable trust allows you to change the terms while you are still alive
What are the Disadvantages of a Revocable Trust?
One disadvantage of a revocable trust is that the assets placed in the trust are not shielded from creditors and are also subjected to federal and state taxes. Likewise, since the trust owner is still alive and is still able to accumulate other assets, the terms of the revocable trust must be revised regularly to include the newly acquired assets. Furthermore, a revocable trust does not name any guardianship in case you have beneficiaries who are minors.
The key takeaway from this is that revocable trusts may involve a lot of time and effort to draw up. However, this type of trust is important, especially if you have accumulated much wealth during your lifetime. With a revocable trust, you control the terms of the agreement while you are still living. This control means that you easily add or remove beneficiaries in your trust.
