What is a revocable trust?
When most people think about estate planning, their first thought likely involves creation of a will. Others may realize the importance of a living will/healthcare power of attorney or even a financial power of attorney.
Once the bare minimums have been accounted for, it is rare for most people to think any further. That is unfortunate, because there are a wide array of estate planning tools that could be used to the benefit of a large number of people. Many people are simply unaware of their existence and end up missing out on important tools to save time and money.
A revocable trust is one example. Revocable trusts are referred to in a number of different ways – which can make discussion surrounding their use confusing. Revocable trusts are also known as revocable living trusts, living trusts, inter vivos trusts, and living trusts. Each refers to the same basic estate planning tool. For the sake of argument, we shall go with revocable trust.
So what is a revocable trust?
A revocable trust is a trust that is created during a person’s life (hence the name living trust). The trust is then used to help manage assets, allowing you access to them and offering some protection. These kinds of trusts are helpful if you become sick or disabled as they allow for someone else to manage your assets while you are still alive. They can also allow for the distribution of assets once you have passed away. Though revocable trusts do many good things, they do not help in avoiding estate taxes. The reason is that they are revocable, meaning the person who created the trust still has access to the underlying assets contained in the trust. For this reason, estate taxes still apply. That said, revocable trusts are helpful in allowing assets contained within the trust to avoid the probate process.
How does it function?
A revocable trust is created during a person’s lifetime and requires placing assets, whatever you choose, inside a trust. The trust is then overseen by a trustee who manages the property in the trust. While you are alive, you are able to manage the trust yourself, appointing yourself trustee – though this isn’t required. You can also appoint a co-trustee to share the administrative burden with someone else.
After you’ve passed away, the trustee is usually required to either distribute the assets of the trust according to your wishes, or, if you choose to keep the trust up and running, manage the assets on behalf of your beneficiaries.
How is it revocable?
Revocable trusts mean just that: they can be revoked by the person who created the trust at any time, for any reason. This is one of the reasons revocable trusts are popular. This is as opposed to irrevocable trusts, which cannot be undone once established. With a revocable trust you always have the option to change your mind. If your plans change or if your family grows or shrinks, you can amend your trust while you are still alive, thereby reflecting the new realities.
Minnesota Living Trust Lawyer
An experienced Minnesota estate-planning lawyer can help walk you through the probate process, answering questions along the way. For more information on estate planning in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.
Source: “Revocable Trusts,” published at AmericanBar.org.
A lawyer should be paying more attention to punctuation in this very useful article. I note, for example, “well” for “we’ll” (=we will). The recent universal antipathy toward apostrophes, adverbs, and other consequences of texting conventions notwithstanding, punctuation errors can be both damaging and costly. Ripley once published a glaring example from the Congressional Record, many years ago: “All fruit, trees are free from duty”, when the regulation was intended to be, “All fruit-trees are free from duty.” As they say, Verb. sap.
Hello! Thank you for the most useful comment. We’ll be sure to try to have better grammar in the future. We appreciate the time you took to point this out. Have a great day!
Vivian Witz has way too much time on her hands. It’s a shame good manners were not part of her education.
As a former legal secretary, grammar is imperative in legal documents. For some reason, younger generations seem to think grammar is silly, but it is the only way to properly convey your meaning and intent.