Do I Need a Revocable Trust?

The quick answer is…that depends. A revocable trust can be a vital part of an estate plan. In some states, revocable trusts are the norm. In others, not so much. Some promoters hype the revocable trust as a cure-all for everything from corns to cancer. The reality may not live up to the hype.

What is a Revocable Trust?

A revocable trust is an agreement you have with yourself. You sign both as the person creating the trust and as trustee. The agreement contemplates you’ll contribute property to the trust, which you’ll continue to manage as long as you’re alive and able. If you pass away, then a successor trustee that you’ve chosen steps in to manage your property. He, she or it will continue to hold your property or transfer it to your loved ones depending on how you have it set up. Same if you become incompetent – if you’re no longer able to manage your affairs, your chosen trustee can step in without having to go to court to declare you incompetent. Incompetency proceedings can be nasty affairs, and the revocable trust may help your loved ones avoid that.

It’s revocable in that you can change it, throw it away or get any property at all out of it as long as you’re alive and competent. So, you’re not locked in 20 years from now or even 2 days from now if you want to make a change.

Why Use a Revocable Trust?

There can be a lot of reasons why you’d want a revocable trust. In some states, probate (the process of going to court and getting your will confirmed after your death) can be time consuming and expensive. A revocable trust may help your loved ones avoid some of that.

Another reason is privacy – the terms of the trust aren’t filed with a court. Once you’re gone and the will is filed with the court, it can be obtained by anyone who wants to see it.

A third reason is avoiding a will contest – if you’re concerned that someone would want to challenge your will, the revocable trust could be an additional line of defense. If you have an estranged child or are in a second marriage, the trust can help to make your wishes happen.

Sounds good? What’s the Downside?

Revocable trusts aren’t a cure-all. They’re generally more expensive and more of a hassle to maintain than a will. To put property in the trust, you have to retitle it in your name as trustee (so you’ll need to sign new deeds to property, new titles to cars, and forms changing account ownership for, well, accounts). They generally don’t give you a break on taxes or provide much in the way of asset protection. Like a will, it’s up to the folks you’ve chosen to honor your wishes – if they decide to make off with the money or property, then your loved ones will have to chase them down, so it’s critically important you choose the right person to make sure your wishes are followed.

Some promoters like to overpromise the protection while exaggerating the “horrors of probate.” In Georgia and Florida, where I practice, the probate process runs smoothly, particularly if all the family members are on board. I sometimes tell folks it doesn’t make sense to spend $10,000 today to avoid having to spend $1,500 in the future.

As with everything in estate planning, we recommend seeking a trusted advisor who can help you decide whether a revocable trust is right for you.

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