What is a Revocable Trust?
A revocable trust is a type of trust that may be canceled or altered during the lifetime of the grantor. The property is given to the beneficiaries only after the death of the grantor, at which point the revocable trust becomes irrevocable. Due to the fact that it may be altered at any time before the grantor’s death, it is regarded as part of his or her estate. This type of arrangement offers income and flexibility to the living grantor, as he or she is able to adjust the trust’s provisions and earn income from the trust. An estate planning attorney draws up the revocable trust according to the grantor’s wishes, and such a trust is one of many tools used to create an appropriate estate plan.
Characteristics of a Revocable Trust
A revocable trust holds property or money for the benefit of someone else. The assets of the trust may change on a regular basis due to the appreciation or depreciation of the trustee’s investments or fluctuations in his or her expenses. However, the collective assets comprise the principle of the trust fund and the person or persons benefiting from the trust are the beneficiaries.
Benefits of a Revocable Trust
Because there is significant flexibility with a revocable trust, if the grantor develops health problems or other concerns, the grantor’s chosen manager can be given control over the principal.
Among other advantages of a revocable trust is that proceeds can be distributed according to the grantor’s wishes, whatever they may be. This offers great flexibility to the grantor. For example, the trust can be distributed all at one time, divided into separate trusts for different beneficiaries, divided into unequal parts, or held for grandchildren and great-grandchildren. Similarly, certain family members may be excluded from receiving anything at the time of distribution, if the grantor so desires.
In some families, there may be a child who is not capable of making appropriate spending decisions or responsible investments. If this is the case, that particular child can be given an income for life through the revocable trust, but never have access to the assets, while other children may acquire their share outright.
Should the son or daughter of a grantor have an unfortunate marriage, a revocable trust can also be set up in such a way that the assets never become marital property, but rather remain in the family. The beneficiary may receive a monthly or yearly income from the trust, but cannot withdraw assets as long as he or she remains married to the person the grantor finds questionable.
Any time probate can be avoided, it is typically considered a great advantage. At the death of the grantor, all property in a revocable trust bypasses probate, which saves a significant amount of time and expense for the beneficiaries. Additionally, any property that must pass through probate automatically becomes a matter of public record, as opposed to a trust that keeps the transfer process private.
After the Grantor’s Death
When the grantor of a revocable trust passes away, the trust changes entirely: it immediately becomes irrevocable. It then dictates the way in which the late grantor’s assets must be distributed. The distribution process may continue on into the future for subsequent beneficiaries named by the grantor when he or she still lived.
Contact an estate planning attorney in Orange County or Corona can if you would like more information about possibly adding a revocable trust to your estate plan.