Revocable trusts are a common estate planning tool, but are not the only option for planning for your future. As you consider the different legal tools available to you, you should review the advantages and the disadvantages associated with creating a revocable trust so you can decide if this is the best option or if there is another alternative that might be preferable.
Determining what type of trust makes sense for your needs, and creating a comprehensive estate plan, is essential to avoiding taxes and protecting your assets and your legacy.
Unsworth Law has extensive experience with the creation of revocable trusts as well as with other types of trusts and estate planning tools. Our Essex Junction legal team can help you to decide if a revocable trust is best and can provide you with comprehensive information about all of the different options available to meet your needs.
Advantages and Disadvantages of Revocable Trusts
Some of the advantages of using revocable trusts include the following:
- You can avoid the probate process. When someone passes away, the executor of the estate must probate the will at a probate division of a Vermont Superior Court. The probate process can result in private information about your estate becoming public. Probate can also be a time consuming process, leaving your loved ones waiting for their inheritance.
- Your heirs can receive their inheritance more quickly. Instead of assets being tied up in the probate process for weeks or months, property owned by a trust can immediately be used for the beneficiary. If you have a family business or property that must be carefully managed, it may be best to put it into a trust so that the trustee can manage it and the beneficiaries can receive it quickly rather than the property or business remaining in limbo while the probate process plays out.
- You can avoid a multi-state legal process. If you own property in multiple states, probate could be required in each state where the property is owned. If the trust owns the real estate instead, probate in different locations is avoided.
- You can ensure your property is managed correctly during your lifetime. When you create a living trust, you have a trustee who will manage assets. You can act as the trustee until disability occurs but can specify someone to take over as the trustee if you become disabled or incapacitated. This gives you continued control of your assets and property while you are still able to handle this responsibility but allows for the seamless transfer of control to a trustee when your physical or mental condition deteriorates.
Some of the disadvantages of revocable trusts include the following:
- Your relationship to the trust property changes. You no longer own the property- the trust does. You will need to establish checking accounts in the name of trustee (for example “Jane Doe Revocable Trust”) and when assets are acquired or sold they must be titled in the name of the trustee.
- There is an immediate cost associated with setting up a revocable trust. While there should be savings down the line since your heirs won’t have probate courts and legal fees for probate, you will have to pay for the cost of setting up a trust at the time when it is created. There could also be a cost associated with transferring assets to the trust. For example, there is usually a charge for preparing deeds.
- There are accounting requirements. Maintaining good financial records and keeping organized books is important to ensure trust assets are managed appropriately and that all accounts are maintained in the proper trust form.
- There are limits on tax planning. A living trust or revocable trust does not provide tax advantages since you maintain control of the property. The property is still included in your estate for federal estate tax purposes. There are also more limited tax planning options available at the time of your death since the trust creates a separate taxpayer with its own rate structure and deductions.
- You will still need to have a will. You will need a will to deal with any assets that are retained outside of your trust.
An Essex Junction Estate Planning Lawyer Can Help With Revocable Trusts
Unsworth Law is ready to help with the creation of your revocable trust. To learn more about whether a revocable trust is right for your situation and to explore all of your estate planning and asset protection options, give us a call at (802) 879-7133 or contact us online. You can also get some important information about estate planning and trusts by joining us for a free seminar.