Revocable Trusts

Revocable Trusts

I am way too tired from this weekend to come up with a really fancy title for this post.. so here goes.. straight and to the point.


The greatest benefit of a revocable trust is that it simplifies the estate-planning process. When a person without a trust passes away, their property is disposed of by a probate court. Not only is this a time-consuming and often costly process, it also generates a public record of the property being passed to heirs. To elaborate on this, there are certain states where it is particularly crucial to avoid the probate process because it becomes TOO costly and TOO cumbersome to be reasonable. Those people living in Florida, for instance, should do everything possible to ensure they avoid probate. Make sure to do some research to find out how “bad” the probate process is in your state.

Any property transferred to a revocable trust is no longer considered a part of your probate estate. It will pass to your heirs in the manner laid out in the governing trust documents without the need of a court’s intervention. This avoids the creation of a publicly available document outlining your assets and their disposition.

Making revocable trusts even more attractive is the ease with which they can be set up. Almost all attorneys that write Wills also write Revocable Trusts. The most important thing to keep in mind is that you need to formally transfer the assets to the trust and designate who the trustee and beneficiaries are — in the case of revocable trusts, these are all generally the grantor until he or she passes away, at which point a successor trustee distributes the trust’s assets to the residual beneficiaries.

Essentially, while you’re alive, the Revocable Trust functions as a personal account with a fancy title. Once you pass, the document directs how your assets are distributed. No one needs to approve and the trust doesn’t get filed anywhere until your death – which also means you can amend your revocable trust as many times as you’d like, as long as you’re alive and in good mental health.

That being said, there are two downsides to using a revocable trust as opposed to an irrevocable one. First, unlike an irrevocable trust, a revocable trust doesn’t protect the assets therein from the grantor’s creditors or legal liability. Because a transfer to an irrevocable trust is, well, irrevocable, its assets are no longer owned by the grantor. Thus, if the grantor incurs a legal liability or owes money to a creditor, those assets can’t be used to satisfy the debt any more than, say, the assets of the grantor’s neighbor.

And second, while a revocable trust allows the assets therein to avoid probate, they are still formally a part of your estate and thus incur estate taxes. Again, just for the sake of comparison, because the assets in an irrevocable trust are no longer yours, they neither go through the probate process nor are they subject to estate taxes.

The net result is this: If you’re simply looking for a legal device that will assist your estate-planning process without affording any immediate benefits or protection, then a revocable trust may be the way to go. This is particularly true if you want the flexibility offered by the power to revoke the legal entity. But if you also want to protect your assets while you’re still alive, and you don’t mind relinquishing the right to later change your mind and undo the transfer, then the best course may be an irrevocable trust instead.

What’s A “Will”?

What’s A “Will”?

…and why you need one too.

A “Will” – simple person speak for “Last Will & Testament” is a legal document that expresses your wishes regarding the distribution of your property and the care of your minor children, and pets.. if applicable. Basically, it takes a lot of the guess work and legal expense out of the equation if you die, and relieves some burden from your children or whoever is left behind once you’re gone.

If you don’t have  a will in place, a court will decide how things are distributed in the event of your death. This means that your loved ones may not receive the assets you wish to leave them in the event of your death. Oh, and you want that will to be in writing; Oral wills are not widely recognized from a legal perspective.

Creating a will gives you sole discretion over the distribution of your assets. It lets you decide how your belongings – including cars, jewelry, assets of any kind, clothing, art, and so forth, should be distributed. If you have a business, you can also direct the smooth transition of that as well.

If you have minor children, a will allows you to appoint a guardian for them, and allows the guardian to receive compensation for taking care of your children. And last but not least, a will lets you direct your assets to the charity of your choice if you’re charitably inclined or in the event you need a good option for a remainder beneficiary (who will receive your assets in the event all of your family has predeceased you, unlikely… but it does happen).

Things not covered by your will:

  • Community Property
  • Proceeds from life-insurance policy payouts
  • Retirement account assets
  • Assets owned as “Joint Tenants With Rights of Survivor ship”
  • Transfer on death accounts

Basically any thing that already dictates a beneficiary won’t go through your will.

I think the most important thing a will does is provide peace for the family members you leave behind – they don’t have to try to figure out, in a time of grieving – exactly what you would have wanted, and most importantly, they won’t fight over dishes and nonsense if you have already written out who gets what.

Please ensure that the person who writes your will is a Trusts & Estate attorney, not a real estate attorney who happens to write wills on the side, but an active and practicing T & E attorney.

***I am not an attorney, nothing in this writing should be construed as legal advice. Please seek the advice of an attorney for all your legal needs***