As you start planning your estate, you will need to determine which arrangement best suits your needs. You may have heard about people’s experiences in probate court, which is not only lengthy but can diminish an estate’s value through fees. If you have concerns about maintaining your estate’s value, a revocable trust may prove a worthwhile option.
Understanding revocable trusts
A revocable trust will help your estate avoid disbursement through probate court. When setting one up, you will retitle any property under your ownership to the trust. Because the trust is a separate entity, these assets no longer belong to you. Yet, during your lifetime, you can manage, amend and dissolve it, since you can serve as its trustee – the trust’s administrator – until your passing.
Since the trust will survive you after you pass, you will appoint a successor trustee to disburse its assets. This person can pass these assets to your beneficiaries without facing probate because the living trust owned them, not you. And since probate hearings become public record, your estate’s contents will remain private, too, by avoiding it.
You cannot include certain assets – like retirement accounts – in your revocable trust because they require individual ownership. These accounts can avoid probate, though, so long as you designate beneficiaries to them. Furthermore, revocable trusts are not tax exempt. If your trust generates any income, you will have to pay taxes on it. And if a creditor obtains a judgment against you, a revocable trust will not protect your assets from them.
The major advantage of revocable trusts is that they protect your estate from losing value in probate court. And while a revocable trust can come with complications, its benefits may make it suitable for your circumstances. An estate planning attorney can help you take the necessary steps to create one.