What is a Revocable Trust?
A revocable trust, often referred to as a “living trust,” is an estate planning instrument that can be altered or dissolved by the grantor during their lifetime. Unlike an irrevocable trust, it offers flexibility, allowing the grantor to retain control over their assets and make changes as circumstances evolve.
The pros and cons of revocable trusts:
- Income Stream: Can be used by the creator for income while alive and for distributing wealth after death.
- Personal Control: The creator can act as both trustee and beneficiary, maintaining control over assets.
- Probate Avoidance: Helps avoid the time and expense of probate, with courts typically not involved in the trust’s plans.
- Court Challenge Protection: More resistant to legal challenges than wills due to the grantor’s ongoing involvement.
- Privacy: Keeps the details of estate distribution private and out of the public record.
- Asset Type Exclusions: Some assets, like retirement accounts, cannot be included due to tax consequences.
- No Tax Advantages: Offers no benefit for reducing estate or income taxes.
- Requires Re-titling of Assets: All assets must be retitled in the name of the trust, which can be cumbersome.
- Higher Costs: Establishing a revocable trust can be expensive, with legal fees potentially reaching $2,500 for couples.
These points highlight the balance between the benefits of flexibility and control against cost and tax planning considerations.
Who can act as trustee?
Typically, the grantor acts as the trustee, but trusted individuals or corporate entities can also serve, including a successor trustee if the original is unable to continue.
What is the difference between a funded and unfunded trust?
A funded trust holds transferred assets during the grantor’s life, while an unfunded trust is designated to receive assets upon the grantor’s death.
Will it avoid nursing home costs?
No, the property in the trust is still considered yours for purposes such as calculating medical assistance eligibility.
Does it save on estate taxes?
Not directly, but it can preserve a couple’s estate tax exemption with proper planning.
Is it part of my taxable estate when I die?
Yes, the property in a living trust at death is included in the taxable estate.
Will it save on income taxes?
No, trust income from a living trust is treated as the grantor’s income for tax purposes.
Does it create new tax returns?
No, assets in the trust usually continue using the grantor’s social security number, with no additional tax filings required during the grantor’s life.
Can I change the trust after setting it up?
Yes, as long as you are mentally competent, you can change or revoke the trust.
Can it provide for young children when I die?
Yes, provisions for young children can be made similar to those in a will.
Contact Battlefront Legal
Christopher R. Harrison, Esq is a registered attorney in the state of Nevada who stands out as a highly creative trust attorney who is dedicated to tailoring a trust that perfectly aligns with your unique requirements. His approach to estate planning is both innovative and client-focused, ensuring that your trust is crafted to serve your needs effectively.
If you’re looking to establish a trust that is as unique as your estate, reach out to Christopher Harrison. Call him today at (775) 539-0000 or click here to start the conversation about securing your legacy.