A revocable trust is a trust document is written in a manner that the provisions can be altered or canceled dependent on the greator, the Trustor or Grantor's wishess. During the life of the trust, income earned is distributed to the grantor, and only after death does property transfer to the beneficiaries. This type of agreement provides flexibility and income to the living grantor; He is able to adjust the provisions of the trust and earn income, all the while knowing that the estate will be transferred upon death.
Breaking Down 'Revocable Trust'
A revocable trust is a part of elder law and estate planning . It is a document that desinates a fiduciary, a Trustee, who manages and protects assets as the grantor, or owner, throughout his life and ages. The trust may be amended or revoked as the grantor if he desires. The trust property will be included in inheritance and estate taxes . Depending on the trust's directions, the fiduciary, Trustee, or holder of the assets, distributes the assets to the beneficiaries or holds and manages the property. The trust remains private and becomes irrevocable upon the grantor's death.
Characteristics of a Revocable Trust
The money or property held by the trustee for the benefit of someone else is the principal of the trust. The principal changes often due to the trustee's expenses or the investment's appreciation or depreciation. The collective assets comprise the trust estate or trust property. The person or people benefiting from the trust are the beneficiaries. Because a revocable trust lists one or more beneficiaries, the trust avoids court probate process.
Advantages of a Revocable Trust
If the grantor experiences health concerns through the aging process, a revocable trust allows the grantor's chosen manager to take control of the principal. If the grantor owns real estate outside his state of domicile and the real estate is included in the trust, an ancillary probate of the real estate is avoided.
If a beneficiary is not of legal age and cannot hold property in his name, the minor's assets are held in the trust rather than having the court appoint a guardian. If the grantor believes a beneficiary will not use the assets wisely, the trust allows a set amount of money to be distributed on a regular basis.
Disadvantages of a Revocable Trust
Implementing a revocable trust involves much time and effort. Assets must be retitled in the name of the trust to avoid probate. The grantor's entire estate planning can be monitored annually to ensure the trust's objectives are being met. Costs of maintaining a revocable trust are greater than other estate planning tools such as a will. A revocable trust does not offer the grantor tax advantages. Since not all assets will be included in the revocable trust, the grantor must create a will to designate beneficiaries for the remaining assets, to avoid probate. During the grantor's lifetime, the creditors can still reach the property in a revocable trust.
Who Can Help With Setting Up a Trust
Trusts are highly effective estate planning tools. Understanding the benefits they offer and being able to take advantage of those benefits requires an experienced guide. The Davenport and Rock Island attorneys at our firm have more than 40 years of combined experience helping people build efficient and flexible estate plans.
The Benefits of Setting Up a Trust
Some of the benefits that trusts may provide include:
- Avoiding probate
- Avoiding or minimizing unnecessary tax burdens (Illinois residents must plan for their state estate tax)
- Maintaining privacy
- Ability to plan for the needs of minor or disabled family members
- Reducing the risk of creditor claims against your beneficiaries
- Delaying benefits for certain heirs, while others may receive immediate gifts