Unless you have already made end-of-life arrangements, you may wonder about how to handle your final affairs. You may also wish to transfer a home or other valuable property located in a different state from where you reside. In such cases, a revocable trust offers significant advantages. However, revocable trusts also have drawbacks, some of which may outweigh their advantages. Consult with an attorney who specializes in estates and trusts with specific questions concerning your personal circumstances.
A trust provides a legal and financial means for the direction and distribution of real estate, personal property or anything of value. A trust involves three entities: the grantor, who creates the trust; the trustee who is charged with administering the trust; and the beneficiary, the person or person for whose benefit the trust is created. A grantor who is alive and mentally competent may also act as trustee, or the grantor may appoint a third person to fill that role. Trusts may be irrevocable, which means that they cannot be amended or dissolved, or they may be revocable, which means that the grantor retains the right to make changes to the trust or dissolve the trust completely.
Unlike wills, trusts are not required to go through probate. This allows for the immediate distribution of property covered by the will upon the death of the grantor. Probate, on the other hand, typically requires months to complete, requiring the beneficiaries of a will to wait for the court to resolve creditor claims and possible challenges to the will before receiving anything. Establishing a trust also allows a grantor to maintain privacy concerning the extent and content of the estate. By contrast, a will is a public document because it is filed with the court as part of the probate process.
Administration for Incapacitated Living Grantors
Establishing a trust with a third party named as trustee allows for the administration of the affairs of living grantors as well as grantors who have died. This allows a trustee to administer a trust on behalf of a living grantor who has become incompetent due to illness or injury. In cases where a grantor becomes too ill or incompetent to handle financial affairs independently, but has not established a trust, a family member or a friend must go to court to establish a conservatorship to handle the grantor's affairs.
Increased Complexity and Expense
Establishing a trust can be expensive; many attorneys charge more than $1,000 to draft a trust. However, many would-be grantors can use a book, software or other self instruction to draft their own trusts, avoiding that expense, according to legal advice website Nolo. However, a trust cannot provide direction for the care of minor children. In addition, a grantor may need to draft what is known as a pour over will. A pour over will directs property owned by the grantor that is not included in the original trust to be added to the trust upon the death of the grantor.
- Brown Winick Attorneys at Law: Revocable Trust Versus Will -- Advantages and Disadvantages
- IRS.gov; Abusive Trust Tax Evasion Schemes -- Questions and Answers; January 2011
- U.S. Legal: Revocable Living Trust Law and Definitions
- Nolo: Tax Saving AB Trusts
- Nolo: Making a Living Trust -- Can You Do It Yourself?
- Nolo: Why You May Not Need a Living Trust
- The Elder Law Firm: Revocable Living Trusts
- U.S. Legal: Pour Over Will Law and Legal Definition
- Elder Law Answers: Estate Planning -- Trusts
- Nolo: Living Trust FAQ -- What Is a Living Trust?