Nicole T. Livingston, Esq.
What is a Revocable Trust?
At the first meeting, we begin by asking a client to tell us about their family and assets. We need to discuss what your goals are and determine the best approach for writing a document to meet your specific needs. Who should receive your assets? When should your beneficiaries receive the assets? How should they receive your assets upon your death? How can you accomplish this at the least cost to you and your family?
A revocable trust is a legal document, often considered a substitute for a Last Will and Testament. The trust is like a contract. There are three parties to a trust:
The Grantor is the person who establishes or writes the trust.
The Trustee is the person who controls the money titled in the name of the trust.
The Beneficiary is the person who receives the benefit of the money in the trust.
Typically, when drafting a revocable trust as a basic estate plan, the client occupies all three positions. He or she writes the trust, controls the money in the trust, and all the money in the trust is spent for his/her benefit. During the client's lifetime, there is no change to access to accounts, selling or buying assets, or control.
The purpose of the revocable trust is to ease the administration of your estate upon your death by avoiding probate. Probate is the process of transferring assets upon your death. However, if your assets are titled in the trust, then your successor trustee steps in and distributes the assets in the trust according to the written instructions you provided in the trust document itself.
After you write your trust, you change the title of your accounts and real estate to the name of your trust. You also designate the trust as the beneficiary of some accounts, often life insurance policies. Retirement accounts and annuities pass by beneficiary designation; and sometimes, you incorporate your trust as the beneficiary of these accounts. As retirement accounts are assets that have different income tax consequences upon your death, there is no one size fits all to naming a beneficiary. Incorrectly designating a beneficiary on your retirement account can have serious income tax ramifications for the beneficiary who receives such assets. Ask your attorney for advice regarding naming a beneficiary of a retirement account or an annuity.
Sometimes, you can avoid the probate process by designating beneficiaries on all of your accounts, in order for the accounts to pass immediately to the designated person, or you jointly title assets with another person. During the initial conversation with your attorney, it is important to talk about your family. If your beneficiary is young, disabled, or irresponsible, you may not want the money to flow into their hands immediately upon your death. Discussing who should receive your assets, when they should receive the assets, and how they receive the assets is important. Your attorney can provide advice as to the best way to protect your beneficiaries and ensure that your goals are met upon your death. You spent a lifetime accumulating your wealth, you do not want to be penny wise and pound foolish when you draft your estate plan.
As experienced estate planning attorneys who have drafted thousands of estate plans, Council Baradel can offer suggestions you may not have considered. To get started, we offer a free consultation, which is the first step to protecting your loved ones and writing an estate plan.