If you are considering different aspects of your estate plan, there are so many available options. Revocable trusts are one option to consider. There are various types of trusts to choose from. Whether you need a revocable or irrevocable trust depends on your overall estate planning goals. If you choose revocable trusts, there are a few things you need to know.
What a trust is and how it works
A trust is basically a fiduciary agreement between the trustee and the grantor — that is the person who creates the trust. A fiduciary agreement involves one trusted person promising to act on behalf of another, solely for that person’s benefit. Based on the terms of the trust agreement, the trustee is given the authority to hold and manage the trust assets. It provides specific instructions as to how those assets should be managed and distributed, when the time comes.
The common reasons trusts are used in estate planning
Trusts can provide detailed instructions on when and to whom the trust assets should be distributed, usually at some specified time in the future. A trust can also be used to provide protection for particular assets and for certain beneficiaries who need assistance with managing money. Finally, trusts can be used as a way to avoid the expensive, time-consuming and very public legal process known as probate.
What is a revocable trust?
If a trust is revocable, then it can be revoked or its terms can be modified at any time while the grantor is still alive and competent to do so. After your death however, the trust will become irrevocable and no longer subject to revision. For this reason, revocable trusts are very flexible, allowing you to modify their terms whenever your estate planning goals or needs change. Also, with a revocable trust, you can serve as your own trustee initially, which means you do not have to relinquish control of the trust property until your death or incapacity.
You may need to modify your trust
It is quite common for a client’s financial situation to change over the years. Your family situation may change as well, like when you get married or have a baby. When changes happen, it may be necessary to review your trust and modify its terms. The need to make changes to your trust can actually occur frequently during your lifetime. As long as you have a revocable trust it can be amended or revoked as many times as needed.
The steps you must take to revoke a trust
Although the laws in each state may differ to some degree, there are certain basic steps required to revoke a trust. First, you must transfer ownership of the trust property back to yourself. Second, you have to execute a Revocation of Trust, which needs be signed and notarized. The Revocation of Trust lets everyone know that the original trust is now void. Finally, if you were required to register the trust with your local probate court, then you also need to notify that court of the revocation.
Modifying a revocable trust without complete cancelation
Revoking a trust basically means starting over from the beginning after terminating the original trust. There may be some situations where you may not want to start over completely. There are two ways to do this. You can either amend the trust or restate it. Depending on how extensive the changes are, it may be simpler to just revoke the trust and start again. Either way you go, you should be aware of the state laws that govern the creating and revocation of a trust. That way, you can be sure that your amendment or restatement will ultimately be valid.
Should I amend or revoke my trust?
Whether you amend or restate your trust, either strategy will come to the same result. Under some circumstances, an amendment would be sufficient. For instance, if you get married or divorced, have a baby or a grandchild, or your trust property changes substantially, an amendment may be sufficient to handle these new additions. If the beneficiaries change, either because someone has died, or you have changed your mind about who your beneficiaries should be, then an amendment would likely be the best choice. However, when the needed changes are more complex or extensive, it is usually a better choice to revoke the trust and start again.
Attend a FREE seminar! If you have questions regarding a revocable trust, or any other estate planning or administration matters, contact Gersh Law Offices, P.S.C. for a complementary consultation either online or by calling us at (502) 423-7023.